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Pensions with Heterogenous Individuals and Endogenous Fertility

Author

Listed:
  • Helmuth Cremer

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Firouz Gahvari

    (UIUC - University of Illinois at Urbana-Champaign [Urbana] - University of Illinois System)

  • Pierre Pestieau

    (CREPP - Center of Research in Public Economics and Population Economics - ULiège - Université de Liège = University of Liège = Universiteit van Luik = Universität Lüttich)

Abstract

We study the design of pension schemes when fertility is endogenous and parents differ in ability to raise children. Pay-as-you-go schemes require, under perfect information, a marginal subsidy on fertility to correct for the externality they create, equal pensions, and contributions that increase or decrease with the number of children. Under asymmetric information, incentive-related distortions supplement the Pigouvian subsidy. These require an additional subsidy or an offsetting tax depending on whether the redistribution is towards people with more or with less children. In the former case, pensions are decreasing in the number of children; otherwise, they are increasing.

Suggested Citation

  • Helmuth Cremer & Firouz Gahvari & Pierre Pestieau, 2006. "Pensions with Heterogenous Individuals and Endogenous Fertility," Post-Print hal-05104981, HAL.
    • Handle: RePEc:hal:journl:hal-05104981
    DOI: 10.1007/s00148-006-0114-7
    Note: View the original document on HAL open archive server: https://hal.science/hal-05104981v1
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