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Public pensions and growth

Author

Listed:
  • Stéphane Lambrecht

    (Center for Operations Research and Econometrics CORE - UCL - Université Catholique de Louvain = Catholic University of Louvain, GREMARS - Groupe de Recherches Modélisation Appliquée à la Recherche en Sciences Sociales - Université de Lille, Sciences Humaines et Sociales, Université de Lille, Sciences Humaines et Sociales)

  • Philippe Michel

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Jean-Pierre Vidal

    (ECB - European Central Bank)

Abstract

This paper investigates the relationship between the size of an unfunded public pension system and economic growth in an overlapping generation economy, in which altruistic parents finance the education of their children and leave bequests. Unlike the existing literature, we model intergenerational altruism by assuming that children's income during adulthood is an argument of parental utility. Unfunded public pensions can promote growth when families face liquidity constraints preventing them from investing optimally in the education of their children. We consider two alternative ways of financing a public pension system, either by levying social contributions in a lump-sum manner or in proportion to labour income. We find that there is no case for unfunded public pensions in economies where bequests are operative. By contrast, there exists a growth-maximising size of the public pension system in economies where bequests are not operative and individuals are sufficiently patient JEL Classification: H55, I20, D91
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Stéphane Lambrecht & Philippe Michel & Jean-Pierre Vidal, 2005. "Public pensions and growth," Post-Print hal-04279660, HAL.
    • Handle: RePEc:hal:journl:hal-04279660
    DOI: 10.1016/j.euroecorev.2003.09.009
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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I20 - Health, Education, and Welfare - - Education - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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