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Fertility and PAYG Pensions in an Overlapping Generations Model with Endogenous Retirement

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  • Chen, Hung-Ju

Abstract

This paper develops an overlapping generations model with endogenous retirement to examine the effect of fertility on long-run pay-as-you-go (PAYG) pensions. We find that pensions may not necessarily increase with the fertility rate. An increase in the fertility rate will raise pensions if the output elasticity of capital and the tax rate are sufficiently low, but such a change will reduce pensions if the fertility rate is sufficiently high. Our results also indicate that raising the fertility rate is more likely to reduce pensions in developing countries than in developed countries, while such a change tends to raise pensions for countries in which the costs of raising children are low.

Suggested Citation

  • Chen, Hung-Ju, 2015. "Fertility and PAYG Pensions in an Overlapping Generations Model with Endogenous Retirement," MPRA Paper 68020, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68020
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    References listed on IDEAS

    as
    1. Miyazaki, Koichi, 2014. "Optimal pay-as-you-go social security when retirement is endogenous and labor productivity depreciates," MPRA Paper 61166, University Library of Munich, Germany.
    2. Luciano Fanti & Luca Gori, 2012. "Fertility and PAYG pensions in the overlapping generations model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 955-961, July.
    3. Michele Boldrin & Larry E. Jones, 2002. "Mortality, Fertility, and Saving in a Malthusian Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 775-814, October.
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    5. Chen, Hung-Ju, 2015. "Fertility, Official Pension Age, and PAYG Pensions," MPRA Paper 66429, University Library of Munich, Germany.
    6. Sala-i-Martin, Xavier X, 1996. "A Positive Theory of Social Security," Journal of Economic Growth, Springer, vol. 1(2), pages 277-304, June.
    7. Miyazaki, Koichi, 2019. "Optimal Pay-As-You-Go Social Security With Endogenous Retirement," Macroeconomic Dynamics, Cambridge University Press, vol. 23(2), pages 870-887, March.
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    9. Alessandro Cigno, 2007. "Low fertility in Europe: Is the pension system the victim or the culprit? Introduction by Alessandro Cigno," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(03), pages 37-42, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fertility; Retirement; OLG; PAYG pensions.;
    All these keywords.

    JEL classification:

    • 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
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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