Uncertain lifetime, fertility and social security

Investigating the effects of population aging on fertility and economic growth, we show that an increase in life expectancy lowers the fertility rate and raises life-cycle savings, and that a pay-as-you-go social security does not reverse the effect on fertility. Received: 10 March 2000/Accepted: 28 April 2000     

Endogenous fertility,altruistic behavior across generations,and social security systems

The present paper explores the impact of an intergenerational externality on private fertility decisions, under a pay-as-you-go social security system. The analysis is performed in the framework of a steady state growth model, with overlapping generations. To explain why households have children, altruism between parents and children is assumed. Surprisingly, the effects of altruism are not symmetric. The private fertility decisions are optimal only if children love their parents, because children then make private transfers at exactly the right level.Comments of participants of a seminar on economic theory of Prof. K. Jaeger at Free University of Berlin at July 20, 1989, are gratefully acknowledged. I am indebted to Alessandro Cigno, Frank Klanberg and Elmar Wolfstetter for many helpful suggestions.     

Effects of public education and social security on fertility

Introducing a fertility decision and child care cost into an overlapping generations model with public education and social security, we examine the effects of these public policies on fertility. We show that an increase in income tax, which finances social security benefits and public investment in education, increases fertility. On the other hand, with a constant tax rate, a change in the allocation from social security benefits to public investment in education decreases fertility and, with a constant social security tax, the effect of education tax on fertility is neutral.      

On the political economy of social security and public education

This paper analyzes simultaneous voting on the wage tax rate and investment in public education with three overlapping generations and ability differences inside each cohort. Wage tax revenue finances public education and social security benefits. The presence of ability differences introduces a time-consistency problem with repeated voting. This can be solved by trigger strategies, which do not punish upward deviations in the wage tax rate. If there are multiple equilibria, then higher tax rates are associated with more education. Surprisingly, the median voter may be a young citizen, even when cohorts are of the same size.

Pay-as-you-go social security and endogenous fertility in a neoclassical growth model

This paper theoretically studies how unfunded pay-as-you-go social security affects economic growth, the fertility rate, and welfare in a neoclassical growth model. In addition, this paper considers a more general form of child-rearing cost, which is a mixture of time and money. The first observation is that whether the fertility rate increases or not by the expansion of the pay-as-you-go social security depends on (1) the size of the monetary child-rearing cost relative to the time spent on child-rearing and (2) the current fertility and interest rate in laissez faire. The second observation is that income per worker can increase by an expansion in pay-as-you-go social security when the output elasticity of capital is sufficiently small and the payroll tax rate is high. The last finding is that welfare can be improved even though capital is underaccumulated in an economy.     

The effects of financial markets and social security on saving and fertility behaviour in Italy

The paper aims to ascertain the extent to which saving and fertility decisions are affected by the availability and attractiveness of market-based or state-provided alternatives to the family as a source of old-age support. Subordinately, the paper aims to bring evidence to bear on the assumption that fertility is endogenous and jointly determined with saving, and to test two alternative hypotheses about individual motivations. The saving and fertility implications of two alternative models of family choice — based one on the assumption of pure self-interest, the other on that of intergenerational altruism — are first derived theoretically. Saving and fertility equations are then estimated from Italian time-series data, using as explanatory variables the market rate of interest, the social security deficit, various measures of capital market accessibility and social security coverage, and a number of income and wage variables. Particularly worthy of note is the result that a fully-funded increase in social security coverage raises saving, while an increase in the social security deficit has the opposite effect. The empirical findings appear to support the assumption that fertility is endogenous and jointly determined with saving, and to favour the hypothesis that individual decisions are motivated by self-interest rather than intergenerational altruism. Some of the policy implications are briefly discussed in the concluding section.While retaining responsibility for any errors, the authors wish to thank Carlo Casarosa, Wolfram Richter, Ed Wolff and three anonymous referees for helpful comments. Financial support from MURST 40%, under national project Capitale, Capitale Umano, Sicurezza Sociale e Dinamiche Demografische Endogene, is gratefully acknowledged.     

Metropolitan social structure,labor markets,and fertility

This paper develops and examines a community-level model of fertility, incorporating both sociological and economic theoretical perspectives. Data from several government and private sources are analyzed in a series of reduced-form, multivariate regression models. Generally, the results demonstrate that while the conceptual relationships from both schools receive some empirical support, the social structural characteristics (such as social class, religious and ethnic composition) offer somewhat greater explanatory power. In a subsequent analytic stage, principal components analysis is employed in order to estimate a series of revised models, clarifying some inconsistencies found when employing a more “naive” model testing strategy.     

Time preference, international migration, and social security

This paper analyzes both the formation of long-run migration incentives and the consequences of a regime change from “autarky” to “free migration” in an overlapping-generations framework with two countries. Under autarky the countries may differ with respect to their aggregate savings rate or with respect to their pension-wage ratio. It is shown that an individual prefers to live in a country where the capital-labor ratio is close to the Golden Rule level and where his characteristics are relatively scarce. Both the migration incentives and the consequences of free migration are determined by these two effects. Received: 2 March 1998/Accepted: 10 February 1999     

Old-age security, religious celibacy, and aggregate fertility in a Tibetan population

Using the family system as a framework, this study investigates the connection between old-age security concerns and aggregate fertility in Sama and Lho, two ethnically Tibetan villages of highland Nepal. The microdemographic approach reveals a difference in family systems between the two villages that results in Sama having a significantly lower level of fertility than Lho. The key difference lies in the practice of Sama’s (but not Lho’s) householders of designating a daughter to be a nun, a strategy meant to retain female labour within the household and thereby guarantee a caretaker in old age. Although the effect of this practice on individual fertility is unclear, the comparison with Lho reveals how it sharply curtails aggregate fertility by preventing nearly one in five women from marrying. In this case the motivation to ensure old-age security acts as an unintentional preventive check on population growth. Comparisons with other societies illustrate how the population of Sama combines elements of both the historical European and Asian demographic experiences.     

Demographic change and social security

This paper gives an overview over some central aspects of the highly complex topic, pointing out, e.g. the need for more longitudinal research in understanding effects of structural changes in demography and economy on social security. Starting from challenges by an ageing population for health and pension schemes it is briefly discussed whether changes in labour force participation or restructuring public expenditure can soften financing problems. Concerning reforms in pension schemes first changing retirement ages is briefly discussed and then some of the shortcomings in the debate on capital funding versus pay-as-you-go fincancing.Revised, updated and extended version of a lecture, given at the First Annual Congress of the European Society for Population Economics, Rotterdam, September 18, 1987. Revision and extension were inspired by two referees.     

Private support and social security

The issue is addressed whether assistance to persons in need can be left to the ‘family’ and the ‘community’. In that case people depend on their social networks. The support a person receives through a given network of social ties is examined. However, ties are diverse and subject to change. By means of a model of the dynamics of social ties, the conditions for adequate private support are analyzed. The sustainability of private support over time is examined by incorporating the impact on social ties of lending and receiving support. It is shown that support is only an effective alternative in a limited number of situations. Received: 2 January 1997 / Accepted: 2 February 1998     

Social security,social welfare and the aging population

This study examines the effects of pay-as-you-go social security programs in aging economies when the middle-aged both educate their dependent children and subsidize the retirement of the old. Using an overlapping generations framework in which agents are three-period lived but timing of death in the third period is uncertain, we analyze the effects of social security tax schemes, under various demographic assumptions, on capital accumulation, education expenditures, social welfare, and economic growth. We find that in many cases social security crowds out education, and reduces economic growth and social welfare. Received: 29 April 1998/Accepted: 3 March 1999     

Gender equity, social institutions and the future of fertility

Sustained very low levels of fertility in advanced countries can be explained by incoherence between the levels of gender equity applying in different social institutions. In countries with very low levels of fertility, high levels of gender equity are postulated in institutions that deal with people as individuals, while low levels of gender equity apply in institutions that deal with people as members of families.     

Social security and fertility: An international perspective

A number of population scholars have asserted that social security programs such as old-age programs lead to decreased fertility levels because parents need not rely on children for "security" in old age. There is, however, a paucity of empirical data on the above. This paper analyzes 67 countries and shows that social security programs have a measurable negative effect on subsequent levels of fertility. In fact, the social security programs appear to have as much of an independent impact on fertility as do the traditional correlates of fertility (infant mortality, education and per capita income).     

Aging and political decision making on public pensions

In this paper decision making on public pensions in a representative democracy is modeled within the framework of the well-known two-overlapping-generations (OLG) general-equilibrium model with rational expectations. The model is used to analyze the effects of aging on the economy in general and on the evolution of public pension schemes in particular, where aging is interpreted as a combination of a decrease in the rate of population growth and an increase in the political influence of pensioners. Analytical results are derived for the long run as well as for the short run by the method of comparative statics and comparative dynamics respectively. It appears that an increase in transfers to the old is not guaranteed if due to aging their political power increases. JEL classification: J14, H55 Received April 5, 1995 / Accepted September 4, 1995     

Death and Taxes: Longer life, consumption, and social security

We analyze in three steps the influence of the projected mortality decline on the long run finances of the Social Security System. First, on a theoretical level, mortality decline adds person years of life which are distributed across the life cycle. The interaction of this distribution with the age distribution of labor earnings minus consumption, or of taxes minus benefits, partially determines the corresponding steady state financial consequences of mortality decline. The effect of mortality decline on population growth rates also matters, but is negligible in low mortality populations. Second, examination of past mortality trends in the United States and of international trends in low mortality populations, suggests that mortality will decline faster than foreseen by the Social Security Administration s forecasts. Third, we combine the work of the first two parts in dynamic simulations to examine the implications of mortality decline and of alternative forecasts of mortality for the finances of the social security system. Also, we use stochastic population forecasts to assess the influence of uncertainty about mortality decline on uncertainty about finances; we find that uncertainty about fertility still has more important implications than uncertainty about mortality, contrary to sensitivity tests in the official forecasts.     

Another look at fertility and social mobility

This is a response to Basil Zimmer's contention that the classical hypothesis connecting social mobility with fertility was rejected in the Princeton Fertility Study because of a faulty mode of analysis. Arguing from the findings of a strong association in a sample of Aberdeen women, Zimmer asserts that if social origin and destination were taken into account, the same relationship would have emerged in the U.S. data. The evidence from the Princeton Study is reviewed and new evidence presented which confirms the original findings of no relationship.     

Population growth and social security financing

By allowing the population growth to be flexible, this paper analyzes the effect of a tax reform that involves an introduction of consumption taxation for social security financing. It is found that population growth and labor supply play an important role in determining the effect of the tax reform. If population growth and labor supply are exogenous, then an introduction of a consumption tax for social security financing, with the payroll tax rate being endogenous, decreases the interest rate and increases capital accumulation. However, if population growth and labor supply are endogenous, then an introduction of a consumption tax for social security financing increases the interest rate and reduces capital accumulation. Received: 26 February 2001/Accepted: 26 August 2001