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Aging and public pensions in an overlapping-generations model

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  • Meijdam, A.C.

    (Tilburg University, School of Economics and Management)

  • Verbon, H.A.A.

    (Tilburg University, School of Economics and Management)

Abstract

In this paper, a social-welfare maximizing public-pension policy is modeled within the framework of the well-known two-overlapping-generations, general-equilibrium model with rational expectations. The model is used to analyze the effects of aging on the evolution of public-pension schemes. Analytical results are derived for the long run as well as for the short run by the method of comparative statics and comparative dynamics respectively. This shows that the short-run consequences of aging depend crucially on the existing size of the pay-as-you-go-scheme. Copyright 1997 by Royal Economic Society.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Meijdam, A.C. & Verbon, H.A.A., 1997. "Aging and public pensions in an overlapping-generations model," Other publications TiSEM b93c8773-5708-434f-8386-6, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:b93c8773-5708-434f-8386-6046a68af5bb
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    1. Meijdam, Lex & Verhoeven, Marijn, 1998. "Comparative Dynamics in Perfect-Foresight Models," Computational Economics, Springer;Society for Computational Economics, vol. 12(2), pages 115-124, October.
    2. Paul van den Noord & Richard Herd, 1993. "Pension Liabilities in the Seven Major Economies," OECD Economics Department Working Papers 142, OECD Publishing.
    3. Meijdam, Lex & Verbon, Harrie A A, 1996. "Aging and Political Decision Making on Public Pensions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(2), pages 141-158, May.
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    6. Calvo, Guillermo A & Obstfeld, Maurice, 1988. "Optimal Time-Consistent Fiscal Policy with Finite Lifetimes," Econometrica, Econometric Society, vol. 56(2), pages 411-432, March.
    7. B. Douglas Bernheim, 1989. "Intergenerational Altruism, Dynastic Equilibria and Social Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(1), pages 119-128.
    8. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    9. David M. Cutler & James M. Poterba & Louise M. Sheiner & Lawrence H. Summers, 1990. "An Aging Society: Opportunity or Challenge?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 1-74.
    10. Peters, Wolfgang, 1991. "Public Pensions in Transition: An Optimal Policy Path," Journal of Population Economics, Springer;European Society for Population Economics, vol. 4(2), pages 155-175, May.
    11. Judd, Kenneth L., 1982. "An alternative to steady-state comparisons in perfect foresight models," Economics Letters, Elsevier, vol. 10(1-2), pages 55-59.
    12. Meijdam, Lex & Verhoeven, Marijn, 1998. "Comparative Dynamics in Perfect-Foresight Models," Computational Economics, Springer;Society for Computational Economics, vol. 12(2), pages 115-124, October.
    13. repec:fth:harver:1490 is not listed on IDEAS
    14. Blanchet, Didier & Kessler, Denis, 1991. "Optimal Pension Funding with Demographic Instability and Endogenous Returns on Investment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 4(2), pages 137-154, May.
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    Cited by:

    1. Leers, T. & Meijdam, A.C. & Verbon, H.A.A., 1998. "Ageing and Pension Reform in a Small Open Economy : The Role of Savings Incentives," Other publications TiSEM f31f8951-8116-4019-8a40-7, Tilburg University, School of Economics and Management.
    2. Meijdam, Lex & Verbon, Harrie A A, 1996. "Aging and Political Decision Making on Public Pensions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(2), pages 141-158, May.
    3. Craig Brett, 2012. "The effects of population aging on optimal redistributive taxes in an overlapping generations model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(6), pages 777-799, December.
    4. Al-Hassan, Hassana & Devolder, Pierre, 2022. "Stochastic Modellization of Hybrid Public Pension Plans (PAYG) under Demographic Risks with Application to the Belgian Case," LIDAM Discussion Papers ISBA 2022042, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    5. Julio López Díaz & Zenón J. Ridruejo, 2003. "Pensiones, crecimiento y envejecimiento de la población," Investigaciones Economicas, Fundación SEPI, vol. 27(2), pages 343-367, May.
    6. Daisuke Ikazaki, 2014. "A Human Capital Based Growth Model with Environment and Corruption," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 3(1), pages 1-13, December.
    7. Crespo Cuaresma, Jesus & Loichinger, Elke & Vincelette, Gallina A., 2016. "Aging and income convergence in Europe: A survey of the literature and insights from a demographic projection exercise," Economic Systems, Elsevier, vol. 40(1), pages 4-17.
    8. Al-Hassan, Hassana & Devolder, Pierre & Nayrko, Christiana & Nokoh, K. Sagary, 2023. "A Simple Two Period Overlapping Generation (OLG) Model For Public Pension Scheme (PAYG)," LIDAM Discussion Papers ISBA 2023033, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    9. David De La Croix & Géraldine Mahieu & Alexandra Rillaers, 2004. "How Should the Allocation of Resources Adjust to the Baby Bust?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 607-636, October.
    10. Julio Lípez Díaz & Zenón J. Ridruejo, "undated". "Cambio demográfico, inmigración y crecimiento económico," Studies on the Spanish Economy 99, FEDEA.
    11. Lorz, Jens Oliver, 1999. "Social security and redistribution within generations in an overlapping generations model," Kiel Working Papers 957, Kiel Institute for the World Economy (IfW Kiel).
    12. Crespo Cuaresma, Jesus & Lábaj, Martin & Pružinský, Patrik, 2014. "Prospective ageing and economic growth in Europe," The Journal of the Economics of Ageing, Elsevier, vol. 3(C), pages 50-57.
    13. Geri, Milva, 2022. "Pension arrangements and economic thinking: unreal assumptions and false predictions in the case of Argentina," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    14. Echevarria, Cruz A., 2004. "Life expectancy, retirement and endogenous growth," Economic Modelling, Elsevier, vol. 21(1), pages 147-174, January.
    15. Marga Peeters & Loek Groot, 2012. "Demographic Pressure in the European Union," EERI Research Paper Series EERI_RP_2012_11, Economics and Econometrics Research Institute (EERI), Brussels.
    16. repec:diw:diwwpp:dp202 is not listed on IDEAS
    17. Friedrich Breyer & Klaus Stolte, 2001. "Demographic change, endogenous labor supply and the political feasibility of pension reform," Journal of Population Economics, Springer;European Society for Population Economics, vol. 14(3), pages 409-424.
    18. Fernando Perera-Tallo, 2012. "Optimal Retirement Age and Aging Population," 2012 Meeting Papers 728, Society for Economic Dynamics.

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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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