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How should retirement policy adjust to the baby bust ?

David de la Croix (), Géraldine Mahieu and Alexandra Rillaers
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Géraldine Mahieu: UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS)
Alexandra Rillaers: UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)

No 2001003, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: To cope with the observed drop in fertility, four policy options are generally considered : lowering pension benefits, increasing social security contributions, postponing retirement, and reducing public debt in advance. To assess the respective merits of these options, we analyze the optimal allocation of resources in an overlapping generations economy where old agents care about leisure. We characterize the decentralization of the optimum both when the retirement age is compulsory and when it results from a private decision. We conclude that the policy recommendation of postponing retirement is not robust to a wide class of preferences and technologies. In contrast, policies aimed at increasing capital through a reduction in public debt are more robust.

Keywords: pensions; fertility; debt; first-best policy; decentralization (search for similar items in EconPapers)
JEL-codes: E62 H55 O41 (search for similar items in EconPapers)
Pages: 28
Date: 2000-10-01
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Related works:
Journal Article: How Should the Allocation of Resources Adjust to the Baby Bust&quest (2004) Downloads
Working Paper: How should the allocation of resources adjust to the baby bust? (2004) Downloads
Working Paper: HOW SHOULD THE ALLOCATION OF RESOURCES ADJUST TO THE BABY BUST? (2003) Downloads
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