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Stochastic fertility, moral hazard, and the design of pay-as-you-go pension plans

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Author Info
Helmuth Cremer
Firouz Gahvari
Pierre Pestieau

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Abstract

This paper models a two-period overlapping generations economy in the steady state where the realization of the quantity/quality number of children depends on an initial investment in children and on a random shock. It shows that the implementation of the first-best allocation, in which the effort level is publicly observable, requires a subsidy on the investment in children. There should also be full insurance with respect to second-period consumption and pensions must be invariant to the number of children. On the other hand, when investment is unobservable and one cannot subsidize it, the full insurance property goes away. In this case, pensions must be linked positively to the number of children.

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Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 2003-21.

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Date of creation: 2003
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Handle: RePEc:del:abcdef:2003-21

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. Robert Fenge & Volker Meier, 2005. "Pensions and fertility incentives," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 28-48, February. [Downloadable!] (restricted)
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  4. Cigno, Alessandro & Luporini, Annalisa & Pettini, Anna, 2003. "Transfers to families with children as a principal-agent problem," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1165-1177, May. [Downloadable!] (restricted)
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  5. Groezen, B. van & Leers, T. & Meijdam, L., 2000. "Family size, looming demographic changes and the efficiency of social security reform," Discussion Paper 27, Tilburg University, Center for Economic Research. [Downloadable!]
  6. G. ABIO & GŽraldine 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). [Downloadable!]
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  7. Martin Kolmar, 1997. "Intergenerational redistribution in a small open economy with endogenous fertility," Journal of Population Economics, Springer, vol. 10(3), pages 335-356. [Downloadable!] (restricted)
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  1. Helmuth Cremer & Firouz Gahvari & Pierre Pestieau, 2008. "Pensions with heterogenous individuals and endogenous fertility," Journal of Population Economics, Springer, vol. 21(4), pages 961-981, October. [Downloadable!] (restricted)
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  2. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2004. "Pensions with Endogenous and Stochastic Fertility," IDEI Working Papers 305, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  3. Galasso, Vincenzo & Gatti, Roberta & Profeta, Paola, 2008. "Investing for the Old Age: Pensions, Children and Savings," CEPR Discussion Papers 6825, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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