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Fertility, Retirement Age, and PAYG Pensions

Author

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  • Chen, Hung-Ju
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.

Suggested Citation

  • Chen, Hung-Ju, 2016. "Fertility, Retirement Age, and PAYG Pensions," MPRA Paper 69819, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69819
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    References listed on IDEAS

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    Cited by:

    1. Hung-ju Chen & Koichi Miyazaki, 2020. "Labor productivity, labor supply of the old, and economic growth," Economics Bulletin, AccessEcon, vol. 40(1), pages 277-285.

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    More about this item

    Keywords

    Fertility; Retirement; OLG; PAYG pensions.;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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