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Aging, social security design, and capital accumulation

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  • Dedry, Antoine
  • Onder, Harun
  • Pestieau, Pierre

Abstract

This paper analyzes the impact of demographic aging on capital accumulation and welfare in economies with unfunded pensions. By using a two-period overlapping generations model with potentially endogenous retirement decisions, it shows that both the type of aging, i.e. declining fertility or increasing longevity, and the type of pension system, i.e. defined contributions or defined benefits, are important in understanding this impact. Results show that when aging is driven by an increasing longevity, unregulated retirement age systems lead to greater improvements in welfare. In contrast, with a decreasing fertility, mandatory retirement systems with defined contributions fare better.

Suggested Citation

  • Dedry, Antoine & Onder, Harun & Pestieau, Pierre, 2017. "Aging, social security design, and capital accumulation," The Journal of the Economics of Ageing, Elsevier, vol. 9(C), pages 145-155.
    • Handle: RePEc:eee:joecag:v:9:y:2017:i:c:p:145-155
    DOI: 10.1016/j.jeoa.2016.10.003
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    Cited by:

    1. Willem DEVRIENDT & Freddy HEYLEN, 2020. "Macroeconomic and Distributional Effects of Demographic Change in an Open Economy - The Case of Belgium," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 86(1), pages 87-124, March.
    2. Friese, Max, 2017. "The interplay between trade unions and the social security system in an aging economy," Thuenen-Series of Applied Economic Theory 148, University of Rostock, Institute of Economics.
    3. Pestieau, Pierre & Ponthiere, Gregory, 2016. "Longevity Variations And The Welfare State," Journal of Demographic Economics, Cambridge University Press, vol. 82(2), pages 207-239, June.
    4. Jeongseok Song & Doojin Ryu, 2018. "Aging effects on consumption risk-sharing channels in European countries," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(2), pages 585-617.
    5. Thomas Ziesemer & Anne von Gässler, 2021. "Ageing, human capital and demographic dividends with endogenous growth, labour supply and foreign capital," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(2), pages 129-160, May.
    6. World Bank Group, 2015. "Russian Economic Report, September 2015," World Bank Publications - Reports 22714, The World Bank Group.
    7. Di Liddo, Giuseppe, 2018. "Immigration and PAYG pension systems in the presence of increasing life expectancy," Economics Letters, Elsevier, vol. 162(C), pages 56-61.
    8. Wei Gao & Chengliang Yan & Fuyang Zhao, 2021. "Longevity, Grandparents Caring, and PAYG Pensions," Annals of Economics and Finance, Society for AEF, vol. 22(2), pages 451-465, November.
    9. Silver, Michelle Pannor & Dass, Adrian Rohit & Laporte, Audrey, 2020. "The effect of post-retirement employment on health," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    10. Ziesemer, Thomas, 2018. "The serendipity theorem for an endogenous open economy growth model," MERIT Working Papers 2018-001, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    11. Kristina Karagyozova-Markova, 2016. "Evaluating the effects of population ageing on long-term growth and pension system sustainability in Bulgaria through an overlapping generations model," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 59-78.
    12. Matthias Schön, 2023. "Demographic change and the rate of return in pay-as-you-go pension systems," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(3), pages 1799-1827, July.
    13. Betti, Thierry & Lefebvre, Mathieu & Pestieau, Pierre, 2023. "Macroeconomics of aging," LIDAM Discussion Papers CORE 2023002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Karel Brůna & Jiří Pour, 2023. "Population aging and structural over/underinvestment," Economic Change and Restructuring, Springer, vol. 56(4), pages 2339-2383, August.
    15. Cipriani, Giam Pietro & Fioroni, Tamara, 2021. "Endogenous Demographic Change, Retirement, And Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 609-631, April.

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    More about this item

    Keywords

    Aging; Public finance sustainability; Social security;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H8 - Public Economics - - Miscellaneous Issues

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