Skip to main content

Pensions with heterogenous individuals and endogenous fertility

Abstract

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.

This is a preview of subscription content, access via your institution.

References

  • Abio G, Mahieu G, Patxot C (2004) On the optimality of PAYG pension systems in an endogenous fertility setting. J Pension Econ Finance 3(1):35–62

    Article  Google Scholar 

  • Cigno A, Luporini A, Pettini A (2004) Hidden information problems in the design of family allowance. J Popul Econ 17(4):645–655

    Article  Google Scholar 

  • Cremer H, Gahvari F, Pestieau P (2003) Stochastic fertility, moral hazard, and the design of pay-as-you-go pension plans. Paper presented at CESifo Venice Summer Institute

  • Cremer H, Gahvari F, Pestieau P (2006) Pensions with endogenous and stochastic fertility. J Public Econ (in press)

  • Fenge R, Meier V (2005) Pensions and fertility incentives. Can J Econ 38(1):28–48

    Article  Google Scholar 

  • Samuelson, PA (1958) An exact consumption-loan model of interest with or without the social contrivance of money. J Polit Econ 66(6):467–482

    Article  Google Scholar 

  • Sinn HW (2004) The pay-as-you-go pension system as fertility insurance and an enforcement device. J Public Econ 88(7–8):1335–1357

    Article  Google Scholar 

  • van Groezen B, Leers T, Meijdam L (2003) Social security and endogenous fertility: pensions and child allowances as Siamese twins. J Public Econ 87(2):233–251

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Firouz Gahvari.

Additional information

Responsible editor: Alessandro Cigno

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Cremer, H., Gahvari, F. & Pestieau, P. Pensions with heterogenous individuals and endogenous fertility. J Popul Econ 21, 961–981 (2008). https://doi.org/10.1007/s00148-006-0114-7

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00148-006-0114-7

Keywords

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

JEL Classifications

  • H55
  • J13