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Pensions with heterogenous individuals and endogenous fertility

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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.

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Authors and Affiliations

  1. University of Toulouse (IDEI and GREMAQ), 21, allée de Brienne, 31000, Toulouse, France

    Helmuth Cremer

  2. Department of Economics, University of Illinois at Urbana–Champaign, Champaign, IL, 61820, USA

    Firouz Gahvari

  3. CREPP, University of Liège and CORE, 7, bd du Rectorat, 4000, Liège, Belgium

    Pierre Pestieau

Authors
  1. Helmuth Cremer
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  2. Firouz Gahvari
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  3. Pierre Pestieau
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Corresponding author

Correspondence to Firouz Gahvari.

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Responsible editor: Alessandro Cigno

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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

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

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