Journal of Population Economics

, Volume 21, Issue 4, pp 961–981 | Cite as

Pensions with heterogenous individuals and endogenous fertility



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 


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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  • Helmuth Cremer
    • 1
  • Firouz Gahvari
    • 2
  • Pierre Pestieau
    • 3
  1. 1.University of Toulouse (IDEI and GREMAQ)ToulouseFrance
  2. 2.Department of EconomicsUniversity of Illinois at Urbana–ChampaignChampaignUSA
  3. 3.CREPPUniversity of Liège and CORELiègeBelgium

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