Are family allowances and fertility-related pensions perfect substitutes?

Robert Fenge and Volker Meier

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This paper discusses alternative ways to deal with the positive externalities of having children in a pay-as-you-go pension system. Family allowances are compared to introducing a fertility-related component into the pension formula. In an endogenous labor supply setting, both instruments are shown to be equivalent if general pensions are related to previous contributions. In contrast, if general pensions are of the flat-rate type, making pensions contingent on the number of children is generally preferable to family allowances because the latter creates a larger tax load on labor supply.

Date: 2009
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Citations: View citations in EconPapers (27)

Published in International Tax and Public Finance 2 16(2009): pp. 137-163

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