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The Role of Social Security in Household Decisions: VAR Estimates of Saving and Fertility Behaviour in Germany

Author

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  • Alessandro Cigno,

  • Luca Casolaro

  • Furio C. Rosati

Abstract

Estimating saving and fertility simultaneously by the VAR method, we find that social security cover has a positive effect on household saving, and a negative effect on fertility. In Germany, as in other countries where the hypothesis was tested,social security is thus good for growth. A possible explanation for this unconventional finding is that compulsory saving in the form of pension contributions tends to displace intra-family transfers, rather than asset formation. However, the negative effect of social security on fertility tends to erode the system’s own contributory base, because it reduces the number of future contributors. That is one of the reasons why, in Germany as elsewhere, pay-as-you-go pension systems tend to be financially unstable. To some extent, this is counteracted by child-related benefits, which tend to encourage fertility, but the effect appears to be weak.

Suggested Citation

  • 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.
    • Handle: RePEc:wpc:wplist:wp07_01
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    Cited by:

    1. Kruse, Agneta & Nyberg, Kristian, 2004. "Pensions and external effects of ageing; effects on distribution," Working Papers 2004:27, Lund University, Department of Economics.
    2. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July.
    3. Hans-Werner Sinn, 2005. "Europe’s Demographic Deficit A Plea For A Child Pension System," De Economist, Springer, vol. 153(1), pages 1-45, December.
    4. Oshio, Takashi & 小塩, 隆士 & オシオ, タカシ, 2003. "Social Security, Child Allowances, and Endogenous Fertility," Discussion Paper 171, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    5. Luciano Fanti & Luca Gori, 2010. "Family Policies And The Optimal Population Growth Rate: Closed And Small Open Economies," Metroeconomica, Wiley Blackwell, vol. 61(1), pages 96-123, February.
    6. Hans-Werner Sinn, 2003. "Das demographische Defizit - die Fakten, die Folgen, die Ursachen und ihre Politikimplikationen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 56(05), pages 20-36, March.
    7. CAMILLI, Andrea; LAGERBORG, Andresa, 2017. "Do Labor Market Institutions Matter for Fertility?," Economics Working Papers ECO 2017/07, European University Institute.
    8. Krieger, Tim, 2005. "Renten und Zuwanderung: Ein Überblick über neue Ergebnisse der Forschung," Arbeitspapiere der Nordakademie 2005-04, Nordakademie - Hochschule der Wirtschaft.
    9. Cigno, Alessandro & Rosati, Furio C. & Tzannatos, Zafiris, 2002. "Child labor handbook," Social Protection Discussion Papers and Notes 25507, The World Bank.
    10. Robert Fenge & Volker Meier, 2005. "Pensions and fertility incentives," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 28-48, February.
    11. Jorge Miguel Lopo Gonçalves Andraz, 2014. "On the Long-Term Macroeconomic Effects of Social Security Spending: Evidence for 12 EU Countries," CEFAGE-UE Working Papers 2014_08, University of Evora, CEFAGE-UE (Portugal).
    12. Hans-Werner Sinn, 2013. "Das demographische Defizit – die Fakten, die Folgen, die Ursachen und die Politikimplikationen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 66(21), pages 03-23, November.
    13. GAGGERMEIER Christian & LUCKE Bernd, 2010. "Pension Systems and Population Growth: An Overlapping-Generations Model with Endogenous Birth Rates," EcoMod2003 330700056, EcoMod.
    14. Sinn, Hans-Werner, 2005. "Europe's Demographic Deficit," Munich Reprints in Economics 934, University of Munich, Department of Economics.

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    Keywords

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    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D10 - Microeconomics - - Household Behavior - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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