Pension Design when Fertility Fluctuates: The Role of Capital Mobility and Education Financing

Jovan Zamac ()

No 1569, CESifo Working Paper Series from CESifo

Abstract: This study compares alternative designs of an unfunded pension system. Convex combinations between a fixed contribution rate and a fixed benefit rate are considered. The objective is to maximize the expected ex-ante welfare under stochastic fertility. The model is a three-period CGE framework where the design of the education system and effects on factor prices are accounted for. The effects on factor prices depend on the degree of capital mobility. For low degrees of capital mobility it is optimal to have a fixed benefit rate in the pension system. But for the small open economy, a fixed contribution rate is optimal if the education system has a fixed benefit rate. This design of education and pension systems assures that individuals in the small open economy are unaffected by fertility fluctuations.

Keywords: pension schemes; demography; social security; education; fertility (search for similar items in EconPapers)
JEL-codes: H52 H55 J13 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-edu and nep-pbe
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