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PAYG pensions and fertility drop: some (pleasant) arithmetic

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  • Luciano Fanti

Abstract

This paper explores whether the common belief that the currently observed fertility drop is a threat (or, conversely, the invoked fertility recovery is beneficial) for PAYG pensions is really always validated by the basic accounting of the PAYG pension budget. It is shown, through a simple arithmetic, that, rather surprisingly, in the long run a fertility drop may be beneficial, while, conversely, a fertility recovery may be harmful for pensions, under rather realistic conditions as regards both fertility changes and time costs of childrearing. Furthermore, this result also holds a fortiori in the short run.

Suggested Citation

  • Luciano Fanti, 2012. "PAYG pensions and fertility drop: some (pleasant) arithmetic," Discussion Papers 2012/147, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2012/147
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2012-147.pdf
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    More about this item

    Keywords

    PAYG pension; OLG model.;

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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