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How to Avoid a Pension Crisis: A Question of Intelligent System Design

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  • Cigno, Alessandro

    () (University of Florence)

Abstract

Conventional pension systems suffer from a design defect which makes them financially unsustainable, and a source of inefficiency for the economy as a whole. The paper outlines a second-best policy which includes a public pension system made up of two parallel schemes, a Bismarckian one allowing individuals to qualify for a pension by working and paying contributions in the usual way, and an unconventional one allowing them to qualify for a pension by having children, and investing time and money in their upbringing.

Suggested Citation

  • Cigno, Alessandro, 2009. "How to Avoid a Pension Crisis: A Question of Intelligent System Design," IZA Policy Papers 4, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izapps:pp4
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    References listed on IDEAS

    as
    1. Entwisle, Barbara & Winegarden, C R, 1984. "Fertility and Pension Programs in LDCs: A Model of Mutual Reinforcement," Economic Development and Cultural Change, University of Chicago Press, vol. 32(2), pages 331-354, January.
    2. Diamond Peter A & Orszag Peter R, 2005. "Saving Social Security: The Diamond-Orszag Plan," The Economists' Voice, De Gruyter, vol. 2(1), pages 1-9, April.
    3. Robert Fenge & Volker Meier, 2005. "Pensions and fertility incentives," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 28-48, February.
    4. Cigno, Alessandro & Luporini, Annalisa & Pettini, Anna, 2003. "Transfers to families with children as a principal-agent problem," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1165-1177, May.
    5. Schultz, T. Paul, 2008. "Population Policies, Fertility, Women's Human Capital, and Child Quality," Handbook of Development Economics, Elsevier.
    6. Jie Zhang & Junsen Zhang, 2004. "How does social security affect economic growth? Evidence from cross-country data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(3), pages 473-500, August.
    7. Alessandro Cigno & Luca Casolaro & Furio C. Rosati, 2002. "The Impact of Social Security on Saving and Fertility in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(2), pages 189-189, May.
    8. Charles Hohm, 1975. "Social security and fertility: An international perspective," Demography, Springer;Population Association of America (PAA), vol. 12(4), pages 629-644, November.
    9. Alessandro Cigno & Gianna Giannelli & Furio Rosati & Daniela Vuri, 2006. "Is there such a thing as a family constitution? A test based on credit rationing," Review of Economics of the Household, Springer, vol. 4(3), pages 183-204, September.
    10. Cigno, Alessandro, 2008. "Is there a social security tax wedge," Labour Economics, Elsevier, vol. 15(1), pages 68-77, February.
    11. Cigno, Alessandro & Rosati, Furio Camillo, 1992. "The Effects of Financial Markets and Social Security on Saving and Fertility Behaviour in Italy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 5(4), pages 319-341.
    12. Gary S. Becker & Robert J. Barro, 1988. "A Reformulation of the Economic Theory of Fertility," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 1-25.
    13. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2004. "Hidden information problems in the design of family allowances," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 645-655, December.
    14. Martin Werding & Herbert Hofmann, 2006. "Die fiskalische Bilanz eines Kindes im deutschen Steuer- und Sozialsystem," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 59(02), pages 28-36, January.
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    18. Cigno, Alessandro, 1986. "Fertility and the Tax-Benefit System: A Reconsideration of the Theory of Family Taxation," Economic Journal, Royal Economic Society, vol. 96(384), pages 1035-1051, December.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Saving pensions with conditional benefits
      by Economic Logician in Economic Logic on 2010-05-12 19:15:00

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    Cited by:

    1. Gilles Le Garrec, 2015. "Increased longevity and social security reform: questioning the optimality of individual accounts when education matters," Journal of Population Economics, Springer;European Society for Population Economics, vol. 28(2), pages 329-352, April.
    2. repec:eee:hapoch:v1_609 is not listed on IDEAS
    3. Li, Shiyu & Lin, Shuanglin, 2016. "Population aging and China's social security reforms," Journal of Policy Modeling, Elsevier, vol. 38(1), pages 65-95.
    4. Tim Buyse, 2014. "Pensions and fertility: a simple proposal for reform," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/888, Ghent University, Faculty of Economics and Business Administration.
    5. Luciano Fanti & Luca Gori, 2014. "Endogenous fertility, endogenous lifetime and economic growth: the role of child policies," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(2), pages 529-564, April.
    6. repec:dem:demres:v:36:y:2017:i:42 is not listed on IDEAS
    7. Giam Cipriani, 2014. "Population aging and PAYG pensions in the OLG model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(1), pages 251-256, January.
    8. Renaat Van de Kerckhove & Freddy Heylen & Tim Buyse, 2011. "Pension reform, employment by age, and long-run growth in OECD countries," 2011 Meeting Papers 736, Society for Economic Dynamics.
    9. Luciano Fanti & Luca Gori, 2013. "Fertility-related pensions and cyclical instability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1209-1232, July.
    10. Szilvia Szegõ, 2011. "Pensions containing allowance paid by children – why and how?," Public Finance Quarterly, State Audit Office of Hungary, vol. 56(4), pages 429-445.
    11. Tim Buyse & Freddy Heylen & Renaat Van de Kerckhove, 2013. "Pension reform, employment by age, and long-run growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 769-809, April.
    12. Maciej Lis, 2017. "Productivity based selection to retirement: Evidence from EU-SILC," IBS Working Papers 02/2017, Instytut Badan Strukturalnych.
    13. Koichi Miyazaki, 2013. "Pay-as-you-go social security and endogenous fertility in a neoclassical growth model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1233-1250, July.
    14. Gurgen Aslanyan, 2014. "The migration challenge for PAYG," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(4), pages 1023-1038, October.
    15. Peter J. Stauvermann & Ronald R. Kumar, 2016. "Sustainability of A Pay-as-you-Go Pension System in A Small Open Economy with Ageing, Human Capital and Endogenous Fertility," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 2-20, February.
    16. Cigno, A., 2016. "Conflict and Cooperation Within the Family, and Between the State and the Family, in the Provision of Old-Age Security," Handbook of the Economics of Population Aging, Elsevier.

    More about this item

    Keywords

    pension reform; implicit pension taxes and subsidies; child benefits; fertility; labour productivity;

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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