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Fertility Decisions and the Sustainability of Defined Benefit Pay-as-You-Go Pension Systems

  • Miriam Steurer

    ()

    (School of Economics, The University of New South Wales)

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    The sustainability of a defined benefit pay-as-you-go (DBPAYG) pension system is investigated in the context of an overlapping-generations model of endogenous fertility with heterogeneous agents. The model places particular emphasis on the time costs of child rearing. It illustrates the mechanism by which such a pension system can increase the opportunity cost of having children and hence sow the seeds of its own destruction. The model is then extended to allow for fertility-based payments. Such a system is more likely to be sustainable. The model highlights a number of issues that are of relevance to a number of OECD countries that have generous DBPAYG pension systems and falling fertility rates.

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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2009-06.pdf
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    Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2009-06.

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    Length: 36 pages
    Date of creation: Apr 2009
    Date of revision:
    Handle: RePEc:swe:wpaper:2009-06
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    1. Cournède, Boris & Gonand, Frédéric, 2006. "Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending?," Economics Papers from University Paris Dauphine 123456789/11047, Paris Dauphine University.
    2. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Tranfers to families with children as a principal-agent problem," CHILD Working Papers wp02_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    3. Nishimura, K. & Zhang, J., 1990. "Pay-As-You-Go Public Pensions With Endogenous Fertility," Papers 202, Australian National University - Department of Economics.
    4. Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, vol. 9(4), pages 505-518, November.
    5. Philipp C. Rother & Marco Catenaro & Gerhard Schwab, 2004. "Aging and Pensions in the Euro Area," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(4), pages 593-, December.
    6. 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.
    7. Feldstein, Martin S, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 303-20, May.
    8. 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.
    9. Rosati, Furio Camillo, 1996. "Social security in a non-altruistic model with uncertainty and endogenous fertility," Journal of Public Economics, Elsevier, vol. 60(2), pages 283-294, May.
    10. Manfred Koch & Christian Thimann, 1999. "From Generosity to Sustainability: The Austrian Pension System and Options for its Reform," Empirica, Springer, vol. 26(1), pages 21-38, March.
    11. Nishimura, Kazuo & Zhang, Junsen, 1995. "Sustainable Plans of Social Security with Endogenous Fertility," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 182-94, January.
    12. Martin Kolmar, 1997. "Intergenerational redistribution in a small open economy with endogenous fertility," Journal of Population Economics, Springer, vol. 10(3), pages 335-356.
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