Optimal intergenerational transfers in an endogenous growth model with fertility change

Maurice Marchand, Philippe Michel and Pierre Pestieau
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Maurice Marchand: IAG and CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium

No 1993011, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper analyzes the direction of optimal intergenerational transfers in a setting of endogenous growth à la Arrow-Romer. It shows that the case for ascending transfers such as implied by pay-as-you-go social security is rather weak. What is rather needed is a subsidy on interest income. When demographic shocks are introduced, during the transition period following an unexpected fertility decline, the case for a transfer from the younger to the older generation appears to be stronger. We compare the market equilibrium and the optimal solution in the two cases of a permanent shock and of a transitory shock.

Date: 1993-03-01
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1993011

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