Working Paper: CEPR ID: DP5553
Authors: Helmuth Cremer; Firouz Gahvari; Pierre Pestieau
Abstract: This paper studies the design of pension schemes in a society where fertility is endogenous and parents differ in their ability to raise children. In a world with perfect information, a pay-as-you-go social security system is characterized by equal pensions for all but different contributions which may or may not increase with the number of children. Additionally, fertility must be subsidized at the margin to correct for the externality that accompanies fertility. In a world of asymmetric information, incentive-related distortions supplement the Pigouvian subsidy. These may either require an additional subsidy or an offsetting tax on fertility depending on whether the redistribution is towards people with more or less children. In the former case, pensions are decreasing in the number of children: in the latter case, they are increasing.
Keywords: adverse selection; fertility; pensions
JEL Codes: H55; J13; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fertility choices (J13) | Economic outcomes for individuals (F61) |
| Pension benefits (H55) | Fertility choices (J13) |
| Fertility choices (J13) | Pension benefits (H55) |
| Pension system design (H55) | Fertility choices (J13) |
| Pension system design (H55) | Economic outcomes for individuals (F61) |
| Fertility choices (J13) | Pension system sustainability (H55) |
| Pension benefits (H55) | Economic outcomes for individuals (F61) |