How Should the Allocation of Resources Adjust to the Baby Bust?

David de la Croix, Géraldine Mahieu and Alexandra Rillaers

Journal of Public Economic Theory, 2004, vol. 6, issue 4, 607-636

Abstract: We analyze the impact of a drop in fertility on the optimal allocation of resources in an overlapping generations economy where old workers care about leisure. We also characterize optimal dynamics and study the decentralization of the optimum by means of inter‐generational transfers and/or public debt. We conclude that the policy recommendations of postponing retirement is fragile and depend on preferences and technologies. Also, even when the optimal adjustment of public debt goes into the expected direction in the long run—i.e., public debt should decrease—this may not be the case during the transition.

Date: 2004
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https://doi.org/10.1111/j.1467-9779.2004.00183.x

Related works:
Working Paper: How should the allocation of resources adjust to the baby bust? (2004)
Working Paper: HOW SHOULD THE ALLOCATION OF RESOURCES ADJUST TO THE BABY BUST? (2003)
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