Why Child Allowances Fail to Solve the Pension Problem of Aging Societies

Peter Stauvermann and Frank Wernitz
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Frank Wernitz: Department of Business, IUBH University of Applied Sciences, Rheinlanddamm 201, 44139 Dortmund, Germany

Economies, 2019, vol. 7, issue 4, 1-16

Abstract: The aim of the paper is to investigate how child allowances affect population growth and pension benefits of pay-as-you-go (PAYG) pension systems in small open and closed economies. We apply an overlapping-generations (OLG) model in its canonical form, where we consider endogenous fertility and growth generated by human capital accumulation. From the analysis, we conclude that in a small open economy, child allowances increase the number of children, yet decrease pension benefits over the long run. If we consider a closed economy, the effect of child allowances on fertility is ambiguous and remains negative on pension benefits over the long run.

Keywords: OLG model; PAYG pension system; child allowances; fertility; human capital (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:7:y:2019:i:4:p:117-:d:294492

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