Money and Pay-As-you-Go Pension

Masaya Yasuoka

MPRA Paper from University Library of Munich, Germany

Abstract: In an aging society with fewer children, a pay-as-you-go pension system presents severe difficulties. A decrease in the share of working people among the population raises the burden for pensions per capita to maintain a constant replacement ratio of pensions. This burden reduces capital accumulation. Therefore, income growth is prevented. The analyses in this paper demonstrate that if the replacement rate of pension is high, a decrease in population growth reduces the income growth rate even if a decrease in population growth can raise the income growth rate per capita because the capital stock that the workers can use increases. However, by setting an appropriate monetary policy for decreasing population growth, the income growth is not prevented by an increase in the burdens for pensions. The negative effect of the burden for pensions on income growth can be eliminated by the change of the money supply rate in the long run.

Keywords: Income growth; Pay-as-you-go pension; Monetary policy; Fewer children (search for similar items in EconPapers)
JEL-codes: E52 H55 J11 O42 (search for similar items in EconPapers)
Date: 2016-12-14
New Economics Papers: this item is included in nep-age and nep-mac
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Related works:
Journal Article: Money and Pay-As-You-Go Pension (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:75578

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