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The Impact of Social Security on Saving and Fertility in Germany

Author

Listed:
  • Alessandro Cigno
  • Luca Casolaro
  • Furio C. Rosati

Abstract

Estimating saving and fertility simultaneously by the VAR method, we find that social security coverage 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 intrafamily transfers, rather than conventional 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, the pay-as-you-go pension system is financially brittle. To some extent, that is counteracted by child-related benefits, which tend to encourage fertility, but some retrenchment on the pension front appears to be unavoidable.

Suggested Citation

  • Alessandro Cigno & Luca Casolaro & Furio C. Rosati, 2002. "The Impact of Social Security on Saving and Fertility in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(2), pages 189-211, May.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(2002/200305)59:2_189:tiosso_2.0.tx_2-r
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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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