Abstract
This paper shows the effects on a pay-as-you-go pension system of the demographic change in the standard overlapping generations model. Firstly, we consider a setting with exogenous fertility and then a model with endogenous fertility. In both cases, population aging due to increased longevity implies a reduction in pensions payouts.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Although this is an obvious limitation of our theory, it allows us to compare the results with those obtained by the large literature working with the “canonical” overlapping generations model.
A well-known empirical regularity of growth is that the capital share in added value, α, is about one third.
Similar results have been obtained by Fanti and Gori (2008). However, in that paper, the child-rearing cost was not considered, while here it affects negatively both k ∗ and p ∗ .
In a similar setting, a discussion paper by Fanti and Gori (2009) assumes a fixed cost of child rearing. Here, instead, the time cost of child rearing introduces an additional negative substitution effect on fertility following an increase in longevity.
References
Alders P, Broer DP (2005) Ageing, fertility and growth. J Public Econ 89:1075–1095
Blackburn K, Cipriani GP (2002) A model of longevity, fertility and growth. J Econ Dyn Control 26:187–204
Cigno A (1993) Intergenerational transfers without altruism: family, market and state. Eur J Polit Econ 9:505–518
Cigno A (2006) A Constitutional theory of the family. J Popul Econ 19:259–283
Cigno A (2010) How to avoid a pension crisis: a question of intelligent system design. Cesifo Econ Stud 56:21–37
Cipriani GP, Makris M (2012) PAYG pensions and human capital accumulation: some unpleasant arithmetic. Manch Sch 80:429–446
Cremer H, Gahvari F, Pestieau P (2006) Pensions with endogenous and stochastic fertility. J Public Econ 90:2303–2321
Cremer H, Gahvari F, Pestieau P (2011) Fertility, human capital, and the pension system. J Public Econ 95:1272–1279
Ehrlich I, Lui F (1998) Social security, the family and economic growth. Econ Inq 36:390–409
Fanti L, Gori L (2008) Longevity and PAYG pension systems sustainability. Econ Bull 10(2):1–8
Fanti L, Gori L (2009) Longevity, fertility and PAYG pension systems sustainability. University of Pisa, Department of Economics—Discussion Paper, no. 77
Fanti L, Gori L (2012) Fertility and PAYG pensions in the overlapping generations Model. J Popul Econ 25:955–961
Michel P, Pestieau P (1993) Population growth and optimality. J Public Econ 6:353–362
Nishimura K, Zhang J (1992) Pay-as-you-go public pensions with endogenous fertility. J Public Econ 48:239–258
Rosati FC (1996) Social security in a non-altruistic model with uncertainty and endogenous fertility. J Public Econ 60:283–294
Wigger BU (1999) Pay-as-you-go financed public pensions in a model of endogenous growth and fertility. J Popul Econ 12:625–640
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Alessandro Cigno
Rights and permissions
About this article
Cite this article
Cipriani, G.P. Population aging and PAYG pensions in the OLG model. J Popul Econ 27, 251–256 (2014). https://doi.org/10.1007/s00148-013-0465-9
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00148-013-0465-9