Fertility, human capital accumulation, and the pension system

Helmuth Cremer, Firouz Gahvari and Pierre Pestieau

Journal of Public Economics, 2011, vol. 95, issue 11, 1272-1279

Abstract: This paper provides a unified treatment of externalities associated with fertility and human capital accumulation within pay-as-you-go pension systems. It considers an overlapping generations model in which every generation consists of high earners and low earners with the proportion of types being determined endogenously. The number of children is deterministically chosen but the children's future ability is in part stochastic, in part determined by the family background, and in part through education. In addition to the customary externality source associated with a change in average fertility rate, this setup highlights another externality source. This is due to the effect of a parent's choice of number and educational attainment of his children on the proportion of high-ability individuals in the steady state. Our other results include: (i) Investments in education of high- and low-ability parents must be subsidized; (ii) direct child subsidies to one or both parent types can be negative; i.e., they can be taxes; (iii) net subsidies to children (direct child subsidies plus education subsidies) to at least one type of parents must be positive; (iv) parents who have a higher number of children should invest less in their education.

Keywords: Pay-as-you-go social security; Endogenous fertility; Education; Endogenous ratio of high to low-ability types; Three externality sources; Education subsidies; Child subsidies (search for similar items in EconPapers)
JEL-codes: H2 H5 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272710001313
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Fertility, human capital accumulation, and the pension system (2011)
Working Paper: Fertility, human capital accumulation, and the pension system (2010)
Working Paper: Fertility, Human Capital Accumulation, and the Pension System (2009)
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:eee:pubeco:v:95:y:2011:i:11:p:1272-1279

DOI: 10.1016/j.jpubeco.2010.09.014

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().