Economic growth and stability with public PAYG pensions and private intra-family old-age insurance

Luciano Fanti and Luca Gori ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the steady state and dynamical effects of two historical alternatives as a means of old-age insurance – i.e., voluntary intra-family transfers from young to old members versus pay-as-you-go public pensions –, in a general equilibrium overlapping generations model with children as a desirable good. It is shown that the shift from a private system of old-age insurance to a public system of social security increases GDP per worker. Moreover, although in both cases the dynamics of capital, under myopic expectations, may be globally unstable depending on the size of the (private as well as public) inter-generational transfer, we show that such a shift significantly reduces, for plausible economies, the risk of cyclical instability which otherwise would be dramatically high, especially in countries with high degree of parsimony and low preference for children.

Keywords: Endogenous fertility; Myopic foresight; OLG model; Private old-age support; Public PAYG pensions (search for similar items in EconPapers)
JEL-codes: C62 H55 J14 J18 J26 (search for similar items in EconPapers)
Date: 2010-02-16
New Economics Papers: this item is included in nep-age, nep-dge and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20727

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