Fertility Decisions and the Sustainability of Defined Benefit Pay-as-You-Go Pension Systems

Miriam Steurer ()
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Miriam Steurer: School of Economics, The University of New South Wales

No 2009-06, Discussion Papers from School of Economics, The University of New South Wales

Abstract: The sustainability of a defined benefit pay-as-you-go (DBPAYG) pension system is investigated in the context of an overlapping-generations model of endogenous fertility with heterogeneous agents. The model places particular emphasis on the time costs of child rearing. It illustrates the mechanism by which such a pension system can increase the opportunity cost of having children and hence sow the seeds of its own destruction. The model is then extended to allow for fertility-based payments. Such a system is more likely to be sustainable. The model highlights a number of issues that are of relevance to a number of OECD countries that have generous DBPAYG pension systems and falling fertility rates.

Keywords: Pay-as-you-go pension; Defined benefit; Overlapping generations; Endogenous fertility; Labor participation Rate; Heterogeneous agents (search for similar items in EconPapers)
JEL-codes: H55 J13 J14 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2009-04
New Economics Papers: this item is included in nep-dge
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