The Demographic Challenge of the Interconnected Education and Pension System in the Czech Republic

Sergey Slobodyan and Viatcheslav Vinogradov

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: In their recent paper, Boldrin and Montes (2005) analyze the “return on human capital investment” theory and show that if borrowing for education is not possible, then a combined public education and pension system that uses lump sum taxes and transfers can replicate the first-best decentralized allocation achieved in an economy without taxes where borrowing for human capital accumulation (education) is allowed. Taking into account that such borrowing is either absent or inefficient in many countries, a combined public education/public pensions scheme in such countries might prove to be welfare enhancing. Guided by this theoretical framework, we calibrate the parameters of an interconnected pension and education system for the Czech Republic under different demographic scenarios and fiscal rules. We also model the impact of an increase in the retirement age and of a hypothetical imbalance of pensions or educational transfers.

Keywords: Public education; demographic development; pay-as-you-go pensions (search for similar items in EconPapers)
JEL-codes: H52 H55 I22 I28 J11 J26 (search for similar items in EconPapers)
Date: 2007-04
New Economics Papers: this item is included in nep-age, nep-edu, nep-eec and nep-hrm
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Journal Article: The Demographic Challenge of the Interconnected Education and Pension System in the Czech Republic (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp326

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