Fertility-related pensions and cyclical instability

Fanti, Luciano and Gori, Luca (2010): Fertility-related pensions and cyclical instability.

Abstract

We show that the introduction of unfunded public pensions in a Cobb-Douglas economy with overlapping generations and endogenous fertility may cause complex economic cycles when individuals are short-sighted. In particular, the risk of cyclical instability increases with both the individual degree of thriftiness and the relative weight of individual fertility in the pension system. Our results provide a possible explanation of the occurrence of persistent cycles in an overlapping generations context and represent a policy warning about the dramatic destabilising effects of a fertility-related pension reform.

• Item Type: MPRA Paper
• Language: English
• Keywords: Endogenous fertility; Fertility-related pensions; Myopic foresight; OLG model
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; J - Labor and Demographic Economics > J1 - Demographic Economics > J14 - Economics of the Elderly ; Economics of the Handicapped ; Non-Labor Market Discrimination; J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J26 - Retirement ; Retirement Policies; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium

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