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Fertility, retirement age, and pay‐as‐you‐go pensions

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  • Hung‐Ju Chen

Abstract

This paper develops an overlapping generations model with exogenous and endogenous retirement age to examine the effects of fertility and retirement age on long‐run pay‐as‐you‐go pensions. For both cases, we find that pensions may not necessarily increase with the fertility rate. In the case with exogenous retirement age, a higher fertility rate (retirement age) raises (reduces) pension benefits if the fertility rate and official pension age are low, whereas this result reverses otherwise. In the case with endogenous retirement age, a higher fertility rate raises pensions if the fertility rate and costs of raising children are low; otherwise, such a change decreases pensions. Our numerical results indicate that, under a reasonable range of parameterization, raising the fertility rate is more likely to increase pensions in the case with exogenous retirement age, whereas such a change tends to reduce pensions in the case with endogenous retirement age.

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  • Hung‐Ju Chen, 2018. "Fertility, retirement age, and pay‐as‐you‐go pensions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(6), pages 944-961, December.
    • Handle: RePEc:bla:jpbect:v:20:y:2018:i:6:p:944-961
    DOI: 10.1111/jpet.12343
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    Cited by:

    1. Chen Hung-Ju & Miyazaki Koichi, 2022. "Pay-as-You-Go Social Security and Educational Subsidy in an Overlapping Generations Model with Endogenous Fertility and Endogenous Retirement," The B.E. Journal of Macroeconomics, De Gruyter, vol. 22(2), pages 787-820, June.
    2. Cavalli, F. & Chen, H.-J. & Li, M.-C. & Naimzada, A. & Pecora, N., 2023. "Heterogeneous expectations and equilibria selection in an evolutionary overlapping generations model," Journal of Mathematical Economics, Elsevier, vol. 104(C).
    3. Giorgio Fabbri & Marie-Louise Leroux & Paolo Melindi-Ghidi & Willem Sas, 2024. "Conditioning public pensions on health: effects on capital accumulation and welfare," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(2), pages 1-21, June.
    4. Masato Masuyama & Ryoji Ohdoi, 2022. "The relationship between mandatory retirement and patterns of human capital accumulation," Economics Bulletin, AccessEcon, vol. 42(2), pages 1192-1202.
    5. Jaimes, Richard & Westerhout, Ed, 2023. "Optimal policies in an ageing society," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    6. Hung-ju Chen & Koichi Miyazaki, 2020. "Labor productivity, labor supply of the old, and economic growth," Economics Bulletin, AccessEcon, vol. 40(1), pages 277-285.
    7. Kazutoshi Miyazawa, 2021. "Elderly empowerment, fertility, and public pensions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 941-964, August.
    8. Chen, Hung-Ju & Huang, Shang-Chieh & Miyazaki, Koichi, 2024. "Life expectancy, fertility, and retirement in an endogenous-growth model with human capital accumulation," Economic Modelling, Elsevier, vol. 130(C).

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