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PAYG Pensions and Human Capital Accumulation: Some Unpleasant Arithmetic

  • Giam Pietro Cipriani

    ()

  • Miltiadis Makris

A large literature has studied the effects of PAYG systems on fertility, human capital and growth. We argue that the social security system may also interact with longevity when the latter is endogenously determined. We show that in such an environment, in a dynamically efficient economy PAYG pensions must be sufficiently low in order to ensure positive economic growth. Moreover, a transition to a funded social security system will promote growth, and can thereby take place by fully compensating the losers.

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Paper provided by CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY in its series CHILD Working Papers with number wp19_09.

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Length: 19 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:wpc:wplist:wp19_09
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  1. Echevarria, Cruz A. & Iza, Amaia, 2006. "Life expectancy, human capital, social security and growth," Journal of Public Economics, Elsevier, vol. 90(12), pages 2323-2349, December.
  2. Nishimura, K. & Zhang, J., 1990. "Pay-As-You-Go Public Pensions With Endogenous Fertility," Papers 202, Australian National University - Department of Economics.
  3. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 938, University of Munich, Department of Economics.
  4. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1986. "Assessing Dynamic Efficiency: Theory and Evidence," NBER Working Papers 2097, National Bureau of Economic Research, Inc.
  5. Robert Tamura, 2004. "Human capital and economic development," FRB Atlanta Working Paper 2004-34, Federal Reserve Bank of Atlanta.
  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. Cervellati, Matteo & Sunde, Uwe, 2005. "Human capital formation, life expectancy, and the process of development," Munich Reprints in Economics 20083, University of Munich, Department of Economics.
  8. Pascal Belan & Philippe Michel & Pierre Pestieau, 1998. "Pareto-Improving Social Security Reform," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 23(2), pages 119-125, December.
  9. Giam Pietro Cipriani & Miltiadis Makris, 2004. "Indeterminacy, intergenerational redistribution, endogenous longevity and human capital accumulation," Discussion Papers 0401, Exeter University, Department of Economics.
  10. Panu Poutvaara, 2005. "Social Security Incentives, Human Capital Investment and Mobility of Labor," CESifo Working Paper Series 1544, CESifo Group Munich.
  11. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2004. "Pensions with Endogenous and Stochastic Fertility," IDEI Working Papers 305, Institut d'Économie Industrielle (IDEI), Toulouse.
  12. Davies, James B. & Kuhn, Peter, 1992. "Social security, longevity, and moral hazard," Journal of Public Economics, Elsevier, vol. 49(1), pages 91-106, October.
  13. Frederic, DOCQUIER & Oliver, Paddison & Pierre PESTIEAU, 2006. "Optimal accumulation in an endogenous growth setting with human capital," Discussion Papers (ECON - Département des Sciences Economiques) 2006022, Université catholique de Louvain, Département des Sciences Economiques.
  14. Andersen, Torben M., 2008. "Increasing longevity and social security reforms--A legislative procedure approach," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 633-646, April.
  15. David M. Cutler & Angus S. Deaton & Adriana Lleras-Muney, 2006. "The Determinants of Mortality," NBER Working Papers 11963, National Bureau of Economic Research, Inc.
  16. Pierre Pestieau & Grégory Ponthière & Motohiro Sato, 2008. "Longevity, health spending, and pay-as-you-go pensions," Post-Print halshs-00754319, HAL.
  17. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1989. "Assessing Dynamic Efficiency: Theory and Evidence," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 1-19.
  18. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June.
  19. Cigno, Alessandro, 1992. "Children and Pensions," Journal of Population Economics, Springer, vol. 5(3), pages 175-83, August.
  20. Blackburn, Keith & Cipriani, Giam Pietro, 2002. "A model of longevity, fertility and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 187-204, February.
  21. 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.
  22. Alders, Peter & Broer, D. Peter, 2005. "Ageing, fertility, and growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1075-1095, June.
  23. Christopher H. Wheeler, 2007. "Human capital externalities and adult mortality in the U.S," Working Papers 2007-045, Federal Reserve Bank of St. Louis.
  24. PESTIEAU, Pierre & PONTHIÈRE, Grégory & SATO, Motohiro, 2006. "Longevity and Pay-as-you-Go pensions," CORE Discussion Papers 2006054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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