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Social Security and Demographic Trends: Theory and Evidence from the International Experience

Author

Listed:
  • Isaac Ehrlich

    (SUNY Buffalo)

  • Jinyoung Kim

    (SUNY Buffalo)

Abstract

The worldwide problem with pay-as-you-go, defined-benefits social security systems isn't just financial. Through a dynamic, overlapping-generations model where forming a family and bearing and educating children are choice variables, we show that social security taxes and benefits generate incentives to reduce both family formation and fertility, and that these effects cannot be fully neutralized by counteracting inter-temporal or intergenerational transfers within families. We implement the model using calibrated simulations as well as panel data from 57 countries over 32 years. We find that PAYG tax measures account for a non-trivial part of the downward trends in family formation and fertility worldwide, especially in OECD countries. (Copyright: Elsevier)

Suggested Citation

  • Isaac Ehrlich & Jinyoung Kim, 2007. "Social Security and Demographic Trends: Theory and Evidence from the International Experience," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 55-77, January.
    • Handle: RePEc:red:issued:05-22
    DOI: 10.1016/j.red.2006.09.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Social security; Family; Human capital; Marriage; Divorce; Fertility; Saving; Growth; Public pension; Pay-as-you-go;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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