Endogenous Demographic Change, Retirement and Social Security

Giam Pietro Cipriani and Tamara Fioroni (tamara.fioroni@univr.it)

No 12244, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper, we analyse the effects of demographic change on a 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 pensions; endogenous fertility; aging; retirement (search for similar items in EconPapers)
JEL-codes: H2 H55 H8 J13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2019-03
New Economics Papers: this item is included in nep-age, nep-dge and nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - published in: Macroeconomic Dynamics, 2021, 25 (3), 609-631

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Related works:
Journal Article: ENDOGENOUS DEMOGRAPHIC CHANGE, RETIREMENT, AND SOCIAL SECURITY (2021)
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