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Pensions and Fertility Incentives

  • Fenge, Robert
  • Meier, Volker

This paper discusses the welfare implications of a pay-as-you-go pension reform by introducing a child benefit in an endogenous fertility setting. In the model of a small open economy, higher fertility is associated with a reduction of lifetime labour supply. The optimum share of fertility-related pensions is always below unity, but generally positive. The former is true, since individuals do not take into account the impact of their labour supply choice on the parent generation. It is demonstrated that child allowances are equivalent to fertility-related pensions as instruments to achieve the optimum allocation.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20343.

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Date of creation: 2005
Date of revision:
Publication status: Published in Canadian Journal of Economics 1 38(2005): pp. 28-48
Handle: RePEc:lmu:muenar:20343
Contact details of provider: Postal: Ludwigstr. 28, 80539 Munich, Germany
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Web page: http://www.vwl.uni-muenchen.de

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  1. Hans-Werner Sinn, 1997. "The Value of Children and Immigrants in a Pay-As-You-Go Pension System: A Proposal for a Partial Transition to a Funded System," NBER Working Papers 6229, National Bureau of Economic Research, Inc.
  2. Robert Fenge & Volker Meier, 2004. "Are Family Allowances and Fertility-related pensions Siamese Twins?," CESifo Working Paper Series 1157, CESifo Group Munich.
  3. Bental, Benjamin, 1989. "The Old Age Security Hypothesis and Optimal Population Growth," Journal of Population Economics, Springer, vol. 1(4), pages 285-301.
  4. Berthold U. Wigger, 1999. "Pay-as-you-go financed public pensions in a model of endogenous growth and fertility," Journal of Population Economics, Springer, vol. 12(4), pages 625-640.
  5. G. ABIO & Géraldine MAHIEU & C. Patxot, 2002. "On the Optimality of PAYG Pension Systems in an Endogenous Fertility Setting," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. Alessandro Cigno, & Luca Casolaro & Furio C. Rosati, 2001. "The Role of Social Security in Household Decisions: VAR Estimates of Saving and Fertility Behaviour in Germany," CHILD Working Papers wp07_01, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  7. Tomas Kögel, 2004. "Did the association between fertility and female employment within OECD countries really change its sign?," Journal of Population Economics, Springer, vol. 17(1), pages 45-65, February.
  8. van Groezen, Bas & Leers, Theo & Meijdam, Lex, 2003. "Social security and endogenous fertility: pensions and child allowances as siamese twins," Journal of Public Economics, Elsevier, vol. 87(2), pages 233-251, February.
  9. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 19606, University of Munich, Department of Economics.
  10. Bernhard Felderer & Klaus Ritzberger, 1995. "Family allowances as welfare improvements," Journal of Economics, Springer, vol. 61(1), pages 11-33, February.
  11. Blau, David M & Robins, Philip K, 1988. "Child-Care Costs and Family Labor Supply," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 374-81, August.
  12. Pedro Mira & Namkee Ahn, 2002. "A note on the changing relationship between fertility and female employment rates in developed countries," Journal of Population Economics, Springer, vol. 15(4), pages 667-682.
  13. Zhang, Jie, 1995. "Social security and endogenous growth," Journal of Public Economics, Elsevier, vol. 58(2), pages 185-213, October.
  14. Peters, Wolfgang, 1995. "Public Pensions, Family Allowances and Endogenous Demographic Change," Journal of Population Economics, Springer, vol. 8(2), pages 161-83, May.
  15. Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, vol. 9(4), pages 505-518, November.
  16. Alessandro Cigno & Annalisa Luporini, 2006. "Optimal Policy Towards Families with Different Amounts of Social Capital, in the Presence of Asymmetric Information and Stochastic Fertility," CESifo Working Paper Series 1664, CESifo Group Munich.
  17. Cigno, Alessandro & Rosati, Furio C., 1996. "Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA," European Economic Review, Elsevier, vol. 40(8), pages 1561-1589, November.
  18. van Groezen, B.J.A.M. & Leers, T. & Meijdam, A.C., 2000. "Family Size, Looming Demographic Changes and the Efficiency of Social Security Reform," Discussion Paper 2000-27, Tilburg University, Center for Economic Research.
  19. Martin Kolmar, 1997. "Intergenerational redistribution in a small open economy with endogenous fertility," Journal of Population Economics, Springer, vol. 10(3), pages 335-356.
  20. Hans-Werner Sinn, 1998. "The Pay-As-You-Go Pension System as a Fertility Insurance and Enforcement Device," NBER Working Papers 6610, National Bureau of Economic Research, Inc.
  21. Kolmar, Martin, 2001. " Optimal Intergenerational Redistribution in a Two-Country Model with Endogenous Fertility," Public Choice, Springer, vol. 106(1-2), pages 23-51, January.
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