Fertility, Retirement Age, and PAYG Pensions

Hung-Ju Chen

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops an overlapping generations (OLG) model with exogenous and endogenous retirement age to examine the effects of fertility on long-run pay-as-you-go (PAYG) pensions. We find that in both cases, pensions may not necessarily increase with the fertility rate. In the case with exogenous retirement age, an increase in the fertility rate (retirement age) may raise pensions when the output elasticity of capital is low. When the output elasticity of capital is high, an increase in the fertility rate (retirement age) will reduce (raise) pensions if the tax rate is sufficiently high. In the case with endogenous retirement age, a higher fertility rate will reduce pensions if the fertility rate is sufficiently high, but such a change will raise pensions if the output elasticity of capital and the tax rate are sufficiently low. Our results indicate that raising the fertility rate is more likely to reduce pensions in developing countries than in developed countries, while such a change tends to raise pensions for countries with sufficiently low output elasticity of capital and tax rate.

Keywords: Fertility; Retirement; OLG, PAYG pensions. (search for similar items in EconPapers)
JEL-codes: H55 J13 J26 (search for similar items in EconPapers)
Date: 2016-03-02
New Economics Papers: this item is included in nep-age, nep-dge, nep-gro and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:69819

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