Journal of Population Economics

, Volume 21, Issue 4, pp 961–981

Pensions with heterogenous individuals and endogenous fertility


  • Helmuth Cremer
    • University of Toulouse (IDEI and GREMAQ)
    • Department of EconomicsUniversity of Illinois at Urbana–Champaign
  • Pierre Pestieau
    • CREPPUniversity of Liège and CORE

DOI: 10.1007/s00148-006-0114-7

Cite this article as:
Cremer, H., Gahvari, F. & Pestieau, P. J Popul Econ (2008) 21: 961. doi:10.1007/s00148-006-0114-7


We study the design of pension schemes when fertility is endogenous and parents differ in ability to raise children. Pay-as-you-go schemes require, under perfect information, a marginal subsidy on fertility to correct for the externality they create, equal pensions, and contributions that increase or decrease with the number of children. Under asymmetric information, incentive-related distortions supplement the Pigouvian subsidy. These require an additional subsidy or an offsetting tax depending on whether the redistribution is towards people with more or with less children. In the former case, pensions are decreasing in the number of children; otherwise, they are increasing.


Pay-as-you-go social security Endogenous fertility Redistribution

JEL Classifications

H55 J13

Copyright information

© Springer-Verlag 2006