The pay-as-you-go pension system as fertility insurance and an enforcement device

Hans-Werner Sinn

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

Abstract: A PAYGO system may serve as insurance against not having children and as an enforcement device for ungrateful children who are unwilling to pay their parents a pension. In fact, the latter was Bismarck’s historic motive for introducing this system. It is true that the PAYGO system reduces the investment in human capital, but if it is run on a sufficiently small scale, it may nevertheless bring about a welfare improvement. If, on the other hand, the scale of the system is so large that parents bequeath some of their pensions to their children, it is overdrawn and creates unnecessarily strong disincentives for human capital investment.

Keywords: Fertility insurance; Human capital investment; Pension system (search for similar items in EconPapers)
JEL-codes: H55 J1 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (79)

Published in Journal of Public Economics 88(2004): pp. 1335-1357

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https://epub.ub.uni-muenchen.de/938/1/sinn-pay-as-you-go-system-fertility.pdf (application/pdf)

Related works:
Journal Article: The pay-as-you-go pension system as fertility insurance and an enforcement device (2004)
Working Paper: The pay-as-you-go pension system as fertility insurance and an enforcement device (2004)
Working Paper: The Pay-as-you-go Pension System as a Fertility Insurance and Enforcement Device (1998)
Working Paper: The Pay-As You-Go Pension System as a Fertility Insurance and Enforcement Device (1998)
Working Paper: The Pay-As-You-Go Pension System as a Fertility Insurance and Enforcement Device (1998)
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