Politics of Public Education and Pension Reform with Endogenous Fertility

Uchida, Yuki and Ono, Tetsuo (2024): Politics of Public Education and Pension Reform with Endogenous Fertility.

Abstract

Implications of increased life expectancy on parental fertility decisions and the subsequent alteration of political influence between the younger and older generations have noteworthy consequences for government policies pertaining to education and pension. This study introduces an overlapping generations growth model that incorporates these effects, revealing that higher life expectancy leads to reduced fertility rates, a decline in the education expenditure-GDP ratio, and an increase in the pension benefit-GDP ratio. Additionally, a long-term perspective is adopted to assess the feasibility of implementing pension cuts and highlighting their optimality in terms of social welfare when significant consideration is given to future generations. Moreover, the model simulations compare the effects of immediate and gradual pension cuts on fertility, fiscal policies, and economic growth. The simulation results demonstrate that pension cuts enhance economic growth, which would have been lower in the absence of such measures, with immediate cuts exhibiting particularly notable effectiveness.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fertility; Public Pension; Public Education; Probabilistic Voting; Overlapping Generations
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D70 - General; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H5 - National Government Expenditures and Related Policies > H52 - Government Expenditures and Education; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions

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