Hostname: page-component-cd9895bd7-p9bg8 Total loading time: 0 Render date: 2024-12-24T03:07:47.144Z Has data issue: false hasContentIssue false
  • English
  • Français

ENDOGENOUS DEMOGRAPHIC CHANGE, RETIREMENT, AND SOCIAL SECURITY

Published online by Cambridge University Press:  10 May 2019

Giam Pietro Cipriani  and
Tamara Fioroni
Giam Pietro Cipriani
Affiliation:
University of Verona and IZA
Tamara Fioroni*
Affiliation:
University of Verona
*
Address correspondence to: Tamara Fioroni, Department of Economics, University of Verona, Via Cantarane 24, 37129, Verona, Italy. e-mail: [email protected]. Phone: ++39 0458489.
Get access Rights & Permissions [Opens in a new window]

Abstract

In this paper, we analyze the effects of demographic change on a pay-as-you-go (PAYG) pension system, financed with a defined contribution scheme. In particular, we examine the relationship between retirement, fertility, and pensions in a three-period overlapping generations model. We focus on both the case of mandatory retirement and the case where the retirement age is freely chosen. In the case of mandatory retirement, increasing longevity has an unambiguously negative impact on fertility and pension payouts and a positive effect on the level of physical capital in the steady state. On the other hand, when agents choose the time of retirement, an increase in life expectancy positively affects physical capital only when the tax rate is sufficiently low and can have a positive impact on pension benefits, because agents may find it optimal to retire later and to decrease fertility less. Finally, the effects of the social security tax on capital per worker are negative with mandatory retirement; however, they could be positive in the optimal retirement case.

Keywords

PAYG PensionsEndogenous FertilityAgingRetirement
Type
Articles
Information
Macroeconomic Dynamics , Volume 25 , Issue 3 , April 2021 , pp. 609 - 631
Copyright
© Cambridge University Press 2019

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We thank two anonymous referees and the Editor for their helpful comments. We also thank the seminar participants at the “10th International Conference on Nonlinear Economic Dynamics” (Pisa, September 2017) and the “41st Annual Meeting of the Association for Mathematics Applied to Social and Economic Sciences” (Cagliari, September 2017) for helpful comments and discussions.

References

REFERENCES

Aísa, R., Pueyo, F. and Sanso, M. (2012) Life expectancy and labor supply of the elderly. Journal of Population Economics 25(2), 545–568.CrossRefGoogle Scholar
Apps, P. and Rees, R. (2001) Household production, full consumption and the costs of children. Labour Economics 8(6), 621–648.CrossRefGoogle Scholar
Barro, R. J. and Becker, G. S. (1989) Fertility choice in a model of economic growth. Econometrica: Journal of the Econometric Society 57(2), 481–501.CrossRefGoogle Scholar
Bental, B. (1989) The old age security hypothesis and optimal population growth. Journal of Population Economics 1(4), 285–301.CrossRefGoogle ScholarPubMed
Boldrin, M. and Jones, L. E. (2002) Mortality, fertility, and saving in a Malthusian economy. Review of Economic Dynamics 5(4), 775–814.CrossRefGoogle Scholar
Cabo, F. and García-González, A. (2014) The endogenous determination of retirement age and social security benefits. Macroeconomic Dynamics 18(1), 93–113.CrossRefGoogle Scholar
Caldwell, J. C. (1978) A theory of fertility: From high plateau to destabilization. Population and Development Review 4(4), 553–577.CrossRefGoogle Scholar
Chen, Y. and Lau, S.-H. P. (2016) Mortality decline, retirement age, and aggregate savings. Macroeconomic Dynamics 20(3), 715–736.CrossRefGoogle Scholar
Cigno, A. (1993) Intergenerational transfers without altruism: Family, market and state. European Journal of Political Economy 9(4), 505–518.CrossRefGoogle Scholar
Cigno, A. and Werding, M. (2007) Children and Pensions. Cambridge: MIT Press.CrossRefGoogle Scholar
Cipriani, G. P. (2014) Population aging and PAYG pensions in the OLG model. Journal of Population Economics 27, 251–256.CrossRefGoogle Scholar
Cipriani, G. P. (2018) Aging, retirement, and pay-as-you-go pensions. Macroeconomic Dynamics 22(5), 1173–1183.CrossRefGoogle Scholar
Cipriani, G. P. and Makris, M. (2012) PAYG pensions and human capital accumulation: some unpleasant arithmetic. The Manchester School 80(4), 429–446.CrossRefGoogle Scholar
Cipriani, G. P. and Pascucci, F. (2018) Pension policies in a model with endogenous fertility. Journal of Pension Economics & Finance, forthcoming, doi: 10.1017/S1474747218000148.Google Scholar
Cremer, H., Gahvari, F. and Pestieau, P. (2011) Fertility, human capital accumulation, and the pension system. Journal of Public Economics 95(11), 1272–1279.CrossRefGoogle Scholar
Dedry, A., Onder, H. and Pestieau, P. (2017) Aging, social security design, and capital accumulation. The Journal of the Economics of Ageing 9, 145–155.CrossRefGoogle Scholar
De La Croix, D. and Doepke, M. (2003) Inequality and growth: Why differential fertility matters. American Economic Review 93(4), 1091–1113.CrossRefGoogle Scholar
Fanti, L. and Gori, L. (2008) Longevity and PAYG pension systems sustainability. Economics Bulletin 10(2), 1–8.Google Scholar
Fanti, L. and Gori, L. (2014) Endogenous fertility, endogenous lifetime and economic growth: The role of child policies. Journal of Population Economics 27(2), 529–564.CrossRefGoogle Scholar
Letablier, M.-T., Luci, A., Math, A. and Thévenon, O. (2009) The costs of raising children and the effectiveness of policies to support parenthood in european countries: A literature review. Brussels: Directorate-General Employment, Social Affairs and Equal Opportunities, European Commission.Google Scholar
Livi Bacci, M. (2007) A Concise History of World Population. London, Malden, MA: Blackwell.Google Scholar
Matsuyama, K. (2008) A one-sector neoclassical growth model with endogenous retirement. The Japanese Economic Review 59(2), 139–155.CrossRefGoogle Scholar
Miyazaki, K. (2017) Optimal pay-as-you-go social security with endogenous retirement. Macroeconomic Dynamics 23, 1–18.Google Scholar
Mizuno, M. and Yakita, A. (2013) Elderly labor supply and fertility decisions in aging-population economies. Economics Letters 121(3), 395–399.CrossRefGoogle Scholar
Nishimura, Y., Pestieau, P. and Ponthiere, G. (2017) Education choices, longevity and optimal policy in a ben-porath economy. Mathematical Social Sciences 94, 65–81.CrossRefGoogle Scholar
OECD (2016) OECD Pensions Outlook. Paris: OECD Publishing.Google Scholar
OECD (2018) Gross Pension Replacement Rates (Indicator). Paris: OECD Publishing.Google Scholar
Preston, S. H. (1975) The changing relation between mortality and level of economic development. Population studies 29(2), 231–248.CrossRefGoogle ScholarPubMed
Tabata, K. (2015) Population aging and growth: The effect of pay-as-you-go pension reform. FinanzArchiv: Public Finance Analysis 71(3), 385–406.CrossRefGoogle Scholar
van Groezen, B., Leers, T. and Meijdam, L. (2003) Social security and endogenous fertility: Pensions and child allowances as siamese twins. Journal of Public Economics 87(2), 233–251.CrossRefGoogle Scholar
Wigger, B. U. (1999) Pay-as-you-go financed public pensions in a model of endogenous growth and fertility. Journal of Population Economics 12(4), 625–640.CrossRefGoogle Scholar
Zhang, J. and Nishimura, K. (1993) The old-age security hypothesis revisited. Journal of Development Economics 41(1), 191–202.CrossRefGoogle ScholarPubMed
Zhang, J. and Zhang, J. (2009) Longevity, retirement, and capital accumulation in a recursive model with an application to mandatory retirement. Macroeconomic Dynamics 13(3), 327–348.CrossRefGoogle Scholar