Social Security, the Family, and Economic Growth

Isaac Ehrlich () and Francis Lui

Economic Inquiry, 1998, vol. 36, issue 3, 390-409

Abstract: The authors show that a defined-benefits pay-as-you-go (PAYG) social security system distorts key family-based choices that affect economic growth. They identify human capital as the engine of growth, and the motivating forces linking the family's overlapping generations as mutually productive intergenerational transfers and/or altruism. The PAYG system is shown to affect adversely at least one of three determinants of the economy's growth path: fertility, savings, and investment in human capital. The specific effects may vary over different stages of economic development. The growth rate is expected to fall in advanced economies. The authors' analysis indicates that the effect may be sizeable. Copyright 1998 by Oxford University Press.

Date: 1998
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