PAYG pensions and fertility drop: some (pleasant) arithmetic

Luciano Fanti

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: This paper explores whether the common belief that the currently observed fertility drop is a threat (or, conversely, the invoked fertility recovery is beneficial) for PAYG pensions is really always validated by the basic accounting of the PAYG pension budget. It is shown, through a simple arithmetic, that, rather surprisingly, in the long run a fertility drop may be beneficial, while, conversely, a fertility recovery may be harmful for pensions, under rather realistic conditions as regards both fertility changes and time costs of childrearing. Furthermore, this result also holds a fortiori in the short run.

Keywords: PAYG pension; OLG model. (search for similar items in EconPapers)
JEL-codes: J26 O41 (search for similar items in EconPapers)
Date: 2012-09-01
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge and nep-lma
Note: ISSN 2039-1854
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Working Paper: PAYG pensions and fertility drop: some (pleasant) arithmetic (2012)
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