On social security financial crisis

We indicate that financial crisis in social security programs might be endogenous because social security affects fertility and human capital's decisions and thus, the aggregate growth rate of the economy. These effects lead to an endogenous erosion of the financial basis of the PAYG social security program so that, as a consequence, the PAYG system is not sustainable and it requires continuous increases in the social security tax rate. I received helpful comments in an earlier version of this paper from G.S. Becker, Larry Sjaastad, two anonymous referees and participants at seminars at Pontificia Universidad Catolica de Chile and The University of Chicago. Remaining errors are my own responsibility. Responsible editor: Junsen Zhang.     

Fertility, child care outside the home, and pay-as-you-go social security

We examine the long-run effects of the pay-as-you-go (PAYG) social security scheme on fertility and welfare of individuals in an overlapping generations model, assuming that child-care services are available in the market. We show that the impact of a tax increase on fertility depends on the relative magnitudes of the standard intergenerational redistribution effect through the social security system, the (implicit) subsidy effect through tax-exemption of child rearing at home, and the price effect through changes in the relative price of market child care, and that if parental child-rearing time is inelastic, a tax cut could bring about a Pareto-improving allocation.

Being NEET in Europe Before and After the Economic Crisis: An Analysis of the Micro and Macro Determinants

The right to adequate minimum income protection is one of the key principles included in the European Pillar of Social Rights (EPSR). The EPSR takes a right-based and normative approach, aiming specifically at fulfilling people’s essential needs, not only by guaranteeing sufficiently high income levels, but also by promoting labour market inclusion and access to affordable goods and services of good quality. This paper takes the EPSR as a starting point to propose a needs-based indicator that assesses the adequacy of minimum income protection including these three dimensions in a comprehensive way. We argue that Reference Budgets (RBs), priced baskets of goods and services that represent an adequate living standard, are well-suited to construct such an indicator. To illustrate this empirically, we use RBs for adequate social participation in Belgium which have been constructed for the first time in 2008 and have been regularly updated since then. Through a combination of hypothetical household simulations of essential out-of-pocket costs and designated tax-benefits for families living on different minimum income schemes, we are able to assess the adequacy of minimum income protection for a range of household types over the period 2008–2017. The paper shows that, the proposed indicator is a useful policy tool for both ex-ante and ex-post evaluations of the adequacy of social policy measures in light of the social protection and inclusion rights included in the Pillar.

     

Evaluating multi-regional population projections with Taylor’s law of mean–variance scaling and its generalisation

Organisations that develop demographic projections usually propose several variants with different demographic assumptions. Existing criteria for selecting a preferred projection are mostly based on retrospective comparisons with observations, and a prospective approach is needed. In this work, we use the mean–variance scaling (spatial variance function) of human population densities to select among alternative demographic projections. We test against observed and projected Norwegian county population density using two spatial variance functions, Taylor’s law (TL) and its quadratic generalisation, and compare each function’s parameters between the historical data and six demographic projections, at two different time scales (long term: 1978–2010 vs. 2011–2040; and short term: 2006–2010 vs. 2011–2015). We find that short-term projections selected by TL agree more accurately than the other projections with the recent county density data and reflect the current high rate of international migration to and from Norway. The variance function method implemented here provides an empirical test of an ex ante approach to evaluating short-term human population projections.     

Public pensions in transition

The main purpose of this paper is to analyze problems of financing an old-age insurance when birth rates are low and population declines or fertility fluctuates with time. A government then searches for optimal policies to cope with such problems. A first criterion could be seen in the Pareto principle. But we all know that there is no way out of PAYG unless at least one generation has to pay for the transition. Therefore an optimal policy is concerned with intergenerational redistribution and optimal growth.In the absence of public pensions the economy will in the long run converge to a steady state which is not optimal in the sense of a golden rule. This dynamic in-efficiency results from the decentralized decision making by the consumers and the firms. If the PAYG system influences the savings ratio of the economy, public pensions can be seen as an instrument to implement a modified golden rule.Paper presented at the ISPE-conference on The Fiscal Implications of an Ageing Population, Vaalsbroek, The Netherlands, May 30–June 1, 1990. I am obliged to Dieter Bös, Friedrich Breyer, Christian Keuschnigg, Wolfgang Kitterer, and an anonymous referee for helpful comments on an earlier draft of this paper. Financial support through Deutsche Forschungsgemeinschaft, SFB 303 is gratefully acknowledged.     

Lessons on aging: Hopes and concerns of Japanese women at midlife

ABSTRACT

Japan is leading the global trend of decreasing birth rates and the graying of society. In this study we examine women’s changing gender and intergenerational relationships and how these affect their concerns and hopes for their futures. Many of the 121 midlife women (aged 45–55) interviewed viewed themselves as sandwiched between their mothers-in-law and actual or potential daughters-in-law, at the nadir of intergenerational status within their families, in large part due to changing social patterns in marriage and birth rates. Doubts about the marriageability of their sons arising from role expectations for brides to care for parents-in-law cause concern for many and highlight the gendered and intergenerational nature of aging concerns. Yet, midlife in the 21st century, with changing gender and intergenerational roles, appears to create opportunities for many Japanese women to reflect on the meaning of the next stage of their lives. Changing gender and intergenerational relationships may contribute to their hopes to live a life of self-actualization and to be true to one’s self (jibun rashiku ikiru).     

Disagreement over the immigration of low-income earners in a welfare state

This paper studies natives’ economically motivated preferences over different levels of immigration of low-income earners. Immigration affects natives through both intra- and intergenerational redistribution programmes and in the labour market. Our analysis suggests, in a welfare state that looks after the poor and the aged, economic motivation does not necessarily lead a native to have an extreme opinion on the preferable level of immigration, although it causes disagreement among natives. We find, regardless of parameter values, high-income earners prefer at least as much immigration as low-income earners who, in turn, prefer at least as much immigration as pensioners. The median voter is then likely to be a low-income native.

Beyond Transmission: Intergenerational Patterns of Family Formation Among Middle-Class American Families

Research about parental effects on family behavior focuses on intergenerational transmission: that is, whether children show the same family behavior as their parents. This focus potentially overemphasizes similarity and obscures heterogeneity in parental effects on family behavior. In this study, we make two contributions. First, instead of focusing on isolated focal events, we conceptualize parents’ and their children’s family formation holistically as the process of union formation and childbearing between ages 15 and 40. We then discuss mechanisms likely to shape these intergenerational patterns. Second, beyond estimating average transmission effects, we innovatively apply multichannel sequence analysis to dyadic sequence data on middle-class American families from the Longitudinal Study of Generations (LSOG; N = 461 parent-child dyads). The results show three salient intergenerational family formation patterns among this population: a strong transmission, a moderated transmission, and an intergenerational contrast pattern. We examine what determines parents’ and children’s likelihood to sort into a specific intergenerational pattern. For middle-class American families, educational upward mobility is a strong predictor of moderated intergenerational transmission, whereas close emotional bonds between parents and children foster strong intergenerational transmission. We conclude that intergenerational patterns of family formation are generated at the intersection of macro-structural change and family internal psychological dynamics.     

Pathways of change in social mobility: Industrialization,education and growing fluidity in Brazil

This paper explores the change in intergenerational class mobility over the last quarter-century in Brazil. Using repeated cross-sectional surveys between the early 1970s and the late 1990s and a counterfactual approach, we disentangle cohort from period interpretations of change, and examine the mechanisms driving change in fluidity among Brazilian men. We detect a substantial increase in social fluidity over time, which emerges from period transformation, rather than cohort replacement. This trend departs from industrialized nations, where growing fluidity has been found to be entirely driven by the replacement of older, more rigid cohorts by younger, more fluid ones, and to emerge from educational equalization and a “compositional effect”—educational expansion combined with a weaker intergenerational association among those with higher education. In contrast, in a context of rapid late industrialization, two mechanisms account for growing fluidity in Brazil: the decline in the “economic returns to schooling”, and the weakening of the direct influence of class origins on class destination, net of education. We discuss the implications of these patterns for the understanding of mobility dynamics in different national contexts.     

Population momentum: A wider definition

Summary

Keyfitz has derived an elegant formula for estimating the ultimate size of an initially stable, growing population that abruptly reduces its fertility to replacement level. Reduction of fertility is achieved by the rather unrealistic device of dividing the original age schedule nffertility rates by the net reproduction rate. Only the inertia of the age distribution is thus accounted for, but not that of the fertility schedule. The key idea of an abrupt imposition of a fixed regimen capable in the long run of generating zero population growth may be retained, but the regimen made more realistic. By elaborating the population setting, such disparate ZPG regimens as reduction of marital fertility by contraception, delayed and/or less universal marriage, raised mortality risks, or permanent net out-migration may be formulated. Convergence of the populaton to stationarity becomes a two-phase process: a primary adjustment period of changing fertility rates followed by a period of age adjustment.

The present paper treats what happens when a fixed ZPG sterilization regimen, defined by a minimum age of sterilization γ and constant continuous risk φ of sterilization among unsterilized wives aged γ to β, is imposed abruptly (or else progressively over an interval T) upon an initially stable, growing population. Additional sources of residual growth are: (1) the nine-month lag in sterilization effect owing to pregnancy: (2) the more youthful pattern of child-bearing under sterilization: (3) the extra adjustment period (of length β-γ-0.75) of changing fertility rates; and (4) any delays in exposing elements of the population to the sterilization regimen.

Two questions are pursued. First, how important are the additional sources of residual growth? Secondly, how do their relative sizes vary as a function of the characteristics of the initial population?     

Does time preference change with age?

This study looks at compensating differentials in the National Longitudinal Survey of Youth (NLSY) to derive estimates of the levels of time preference for labor force participants in each of 15 waves of data from 1979 to 1994. With these estimates the evolution of time preference over the life course is described. Future utility among labor force participants appears to be valued more highly by subjects who are older, more schooled, white, or male. Controlling for schooling level, a higher IQ is associated with a preference for more immediate rewards.If social rates of time preference are correlated with individual rates of time preference then population aging could create intergenerational asymmetries in the social rate of time preference.This phenomenon could make the optimal investments of young populations appear selfish to future generations that are older.Support from Hopkins Population Center (R24) is gratefully acknowledged. I am thankful for helpful comments received from Jim Burgess, Mike Grossman, Bruce Hamilton, Fritz Laux, Athanasios Orphanides, Katie Roche, and Eric Slade. All errors are my own. Responsible editor: Alessandro Cigno.     

Optimal age of retirement and population growth

The purpose of this paper is to study intergenerational optimal resources sharing when the social planer can choose the retirement age in addition to consumptions and investment. We use the extension of the Diamond analysis by Hu [1979] that incorporates endogenous retirement age. We found that the optimal retirement age is an increasing function of the population growth rate if the elasticity of substitution of old agents' labor for young agents' labor is lower than one. In the millian case, when the size of a population does not matter, and when the elasticity of substitution of old agents' labor for young agents' labor is strictly higher than one, the optimal retirement age is a decreasing function of the population growth rate. In the benthamite case, the change in the optimal retirement age is indeterminate. Received: 19 February 1999/Accepted: 27 February 2001 All correspondence to Bertrand Crettez. We would like to thank Jean-Pierre Vidal for very helpful comments on an earlier draft. An anonymous referee provided insightful comments on a previous version of this paper. Responsible editor: Alessandro Cigno.     

Intergenerational Coresidence in Developing Countries

Newly available census microdata from IPUMS‐International are used to assess trends in intergenerational coresidence in 15 developing countries. Contrary to expectations, we find no general decline in intergenerational coresidence over the past several decades. There have been, however, significant changes in the configuration of intergenerational coresidence. Families in which a member of the older generation is household head—a configuration consistent with traditional patriarchal forms in which the older generation retains authority—are becoming more common in most of the countries. Intergenerational families headed by a member of the younger generation—the configuration one would expect if intergenerational coresidence were motivated by a need for old‐age support—are on the decline in most of the countries. Multivariate analysis reveals that intergenerational families headed by the older generation are positively associated with measures of economic development. These findings are at variance with widely accepted social theory. We hypothesize that housing shortages, economic stress in the younger generation, and old‐age pensions may contribute to the change. More broadly, in some developing countries rising incomes may have allowed more people to achieve their preferred family structure of intergenerational coresidence following traditional family forms.     

Population policy and individual choice

The general equilibrium implications of endogenous fertility for several social issues of population policy are examined. Laissez faire is found to lead to Pareto optimality within generations even in the presence of public goods and Malthusian diminishing returns. On the other hand, bequests emerge as a major potential source of Pareto inefficiency when parents care about the number and welfare of their offspring. Also considered are questions of intergenerational justice and equity using an intergenerational social welfare function. It is shown that maximizing the sum of utilities always leads to a larger population than maximizing per capita utility, but that the laissez-faire solution may lie outside the interval bounded by the two criteria.Invited Lecture at the First Annual Conference of the European Society for Population Economics, Rotterdam, 18–19 September 1987In preparing this paper, I have drawn heavily on joint work with Assaf Razin and Efraim Sadka, both of Tel-Aviv University, and on our book, Household and economy: Welfare economics of endogeneous fertility (Academic Press, New York 1987). I am indebted to two anonymous referees for helpful comments     

Pareto improving transition from a pay-as-you-go to a fully funded pension system in a model of endogenous growth

In this paper we investigate the possibility of Pareto improving social security reforms within a framework of endogenous growth. Belan et al. (1998) propose a transition from a pay-as-you-go (PAYG) pension system to a system of savings–subsidization. We follow this approach and prove that a Pareto improving conversion from the PAYG system to a fully funded one is possible. Finally, we compare the subsidy system with the fully funded system and discuss the problem of implementing the transition to the fully funded system. Received: 07 March 1999/Accepted: 13 December 1999     

Aging, fertility, social security and political equilibrium

We analyze the effect of population aging on the political choice of the size of a pay-as-you-go (PAYG) social security system, incorporating the heterogeneity of individuals in their preference for having children, and hence the endogenous fertility choices of individuals, into a simple overlapping generations model. We show that population aging may result in an increase in the contribution rate, increasing the share of the retired population who prefer a higher contribution rate; and that, if the system involves redistribution between retirees with different contributions, the increased contribution rate raises the number of individuals who have children, i.e., future contributors.     

A note on intergenerational risk sharing and the design of pay-as-you-go pension programs

Different versions of pay-as-you-go public pension programs may have entirely different effects on the intergenerational distribution of income risk. If the pension benefit is a fixed proportion of previous labor income, a pay-as-you-go program increases the net income risk of all generations. On the other hand, a pay-as-you-go program characterized by a fixed labor income tax rate and uncertain pension benefits provides intergenerational risk sharing. Received: 10 December 1996 / Accepted: 24 November 1997     

A model of voluntary childlessness

Demographers and sociologists have studied why women remain childless for more than two decades; however, this specific choice of zero fertility has not interested economists. Permanent childlessness, in developed countries, can concern up to 30 % of the women in a cohort. Childlessness rates can be positively related to average fertility for some cohorts of women. This paper provides an explanation for this using an endogenous fertility model where individuals have different preferences for children. The main mechanism considered goes through the intergenerational evolution of preferences: I show that a reduction in the gender wage gap, or an increase in the fixed cost of becoming a parent, has a negative effect on both fertility and childlessness. The reduction of childlessness is due to a composition effect: small families shrink more than larger families, and this reduces childlessness.     

Accumulation of Welfare Problems in a Longitudinal Perspective

In this article we study the bias caused by the conventional retrospective measurement of parental high cultural activities in the effects of parental high cultural activities and educational attainment on son’s or daughter’s high cultural activities. Multi-informant data show that there is both random measurement error and correlated error in the respondent’s report of parental high cultural activities. Correlated measurement error is the consequence of the fact that adult children who have higher rates of high cultural activities, report higher levels of parental cultural activities than the parents themselves do. When controls for both types of measurement error are included in structural models, the total intergenerational effect of parental high cultural activities appears to be larger than in a model without controls for measurement error, but the direct intergenerational effect is not biased if educational attainment is controlled for. The effect of educational attainment on high cultural activities is larger in models that correct for measurement error. In addition, the effect of educational attainment is stronger than the effect of parental high cultural activities, both with and without correction for measurement error.

Population growth,age structure,and age-specific productivity

Motivated by empirical evidence that fluctuations in age structure affect relative wages across age groups, this paper asks whether there is a steady-state age distribution that maximizes the lifetime wages of a representative worker. The paper proves the surprising result that in a pure labor economy with any constant returns technology, a uniform age distribution minimizes lifetime wages. Skewed age distributions, generated by either positive or negative population growth rates, generate unambiguously higher lifetime wages than a stationary population, in spite of possible reductions in per capita output in every period. The presence of non-labor factors complicates, but does not necessarily reverse, this result. The paper relates the beneficial effects of higher rates of population growth on lifetime wages in a pure labor economy with imperfect substitutability across age groups to the benefits of population growth that appear in overlapping-generation consumption loan models with intergenerational transfers.A previous version of this paper was presented at the Economic Demography Workshop at the 1988 meetings of the Population Association of America. Helpful comments from Mark Berger, Theodore Bergstrom, Ronald Lee, Hal Varian, and Robert Willis are acknowledged.