Demography and provisions for retirement: the pension composition, a behavioral approach

Bernard van Praag and J. Peter Hop
Additional contact information
J. Peter Hop: University of Amsterdam

JODE - Journal of Demographic Economics, 2021, vol. 87, issue 1, 1-31

Abstract: Pensions may be provided for in a modern society by a mix of several methods, namely by voluntary individual savings, mandatory fully-funded occupational pension systems, mandatory social security financed by pay-as-you-go, and old-fashioned hoarding in cash. We call a specific mixture of the four systems a pension composition. We assume that individual workers decide on their own individual savings, that the fully-funded occupational system is decided upon by the age cohort of the median worker, and that social security is decided upon by the median voter. We assume that individual and collective pension savings are the only sources of capital supply. When capital supply equals demand from industry, there is equilibrium in the capital market with a corresponding equilibrium interest rate and pension composition. In this paper, we assume a demography with one hundred age brackets and we investigate how changes in the birth rates, survival rates, and the retirement age affect the pension composition and the capital market equilibrium. Our conclusion is that for a given technology, the pension composition and the interest rate are determined by the demography and cannot be modified at will as a long-term political instrument.

Keywords: Demography; Funded Pensions; Individual Savings; Interest rate; Overlapping Generations; Social Security; Unfunded Pensions (search for similar items in EconPapers)
JEL-codes: H55 H75 J1 J26 (search for similar items in EconPapers)
Date: 2021-03-01
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1017/dem.2020.22 (application/pdf)

Related works:
Journal Article: Demography and provisions for retirement: the pension composition, a behavioral approach (2021)
Working Paper: Demography and Provisions for Retirement - The Pension Composition, a Behavioral Approach (2020)
Working Paper: Demography and Provisions for Retirement: The Pension Composition, a Behavioral Approach (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvde:v:87:y:2021:i:1:p:1-31

Access Statistics for this article

More articles in JODE - Journal of Demographic Economics from Cambridge University Press Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Sebastien SCHILLINGS ().