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Pension Systems and their Influence on Fertility and Growth

Johannes Holler ()
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Johannes Holler: http://www.univie.ac.at/Wirtschaftswissenschaften

Vienna Economics Papers from University of Vienna, Department of Economics

Abstract: This paper studies the implications of di¤erent public pension systems on fertility and economic growth. Employing a three period overlapping gener- ations endogenous growth model we compare the di¤erent impacts of pay-as- you-go-, fully funded- and informal pension systems. The novelty of our work lies in the formulation of altruism that is assumed to be one sided (descending) for economies represented by a public pension system and two sided (descend- ing and ascending) for economies with informal pension systems. Through the incorporation of a mixed procreation motive we can study the case of fully crowded out intrafamilial transfers inside a public pension system model while still capturing fertility endogenously. We show that the introduction of public pension systems to a developing economy reduce fertility and stimulate economic growth. Through a comparison of the di¤erent public pension systems we highlight that a fully funded pension system results in higher economic growth compared to a pay-as-you-go one despite higher fertility because the growth enhancing e¤ect of the higher capital stock is dominant. This suggests that observed fertility and growth di¤erences between the US and Europe can partly be explained by the di¤erent types of pension systems.

JEL-codes: H55 J13 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age and nep-dge
Date: 2007-06
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