The Impact of Social Security on Saving and Fertility in Germany

Alessandro Cigno, Luca Casolaro and Furio Rosati

FinanzArchiv: Public Finance Analysis, 2002, vol. 59, issue 2, 189-211

Abstract: Estimating saving and fertility simultaneously by the VAR method, we find that social security coverage has a positive effect on household saving, and a negative effect on fertility. In Germany, as in other countries where the hypothesis was tested, social security is thus good for growth. A possible explanation for this unconventional finding is that compulsory saving in the form of pension contributions tends to displace intrafamily transfers, rather than conventional asset formation. However, the negative effect of social security on fertility tends to erode the system's own contributory base, because it reduces the number of future contributors. That is one of the reasons why, in Germany as elsewhere, the pay-as-you-go pension system is financially brittle. To some extent, that is counteracted by child-related benefits, which tend to encourage fertility, but some retrenchment on the pension front appears to be unavoidable.

JEL-codes: C32 E21 H31 H55 J13 J14 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (37)

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