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Fertility decisions and the sustainability of public pension systems.

Chapter 2: Welfare comparisons between funded and pay-as-you-go (PAYG) or unfunded pension systems are often made using the Aaron condition (Aaron, 1966). However, the Aaron condition as usually stated is not precise enough about the exact form of the PAYG pension system. PAYG pension systems can be either of the defined benefit or defined contribution variety. They can also differ with regard to intra-generational redistribution, for example pension benefits can be flat or earnings related. Here, four alternative PAYG pension systems are considered. It is shown that each system generates its own Aaron condition. In addition, the standard Aaron condition assumes that the wage rate and labour participation rate does not vary across individuals. These assumptions are also relaxed. Using US data covering the period 1933-2001, it is shown that the results of welfare comparisons are highly sensitive to different specifications of PAYG systems. Chapter 3: The sustainability of a defined benefit pay-as-you-go (DBPAYG) pension system is investigated in the context of an overlapping-generations model of endogenous fertility. The model places particular emphasis on the time costs of child rearing. It illustrates the mechanism by which such a pension system can increase the opportunity cost of having children and hence sow the seeds of its own destruction. The model is then extended to allow for fertility-based payments. Such a system is more likely to be sustainable. These models highlight a number of issues that are of considerable relevance to a number of OECD countries that have generous DBPAYG pension systems and falling fertility rates. Chapter 4: The previous chapter focused on transition dynamics, while this chapter investigates steady state outcomes of fertility based defined benefit pay-as-you-go (DB-PAYG) pension systems in the context of an overlapping-generations model with endogenous fertility and heterogeneous agents. Special attention is paid to the impact on fertility, utility, taxation, and per capita saving. Chapter 5: A two-stage bargaining model is developed to describe how fertility decisions are made in a strategic family setting. Given the assumption that family contracts are incomplete and cannot be used to enforce optimal behaviour, it is shown that investments in children (i.e. the fertility rate) may be sub-optimal. This is because the woman may find it in her interest to invest too little in children in stage 1 of the model in order to protect her bargaining status in stage 2. The chapter then considers in the context of this model the impact on fertility rates of changes in child custody rules (in the case of divorce), the wage rate, and the male-female wage differential. It concludes by exploring how the introduction of child subsidies can change the results.

Identiferoai:union.ndltd.org:ADTP/257509
Date January 2008
CreatorsSteurer, Miriam, Economics, Australian School of Business, UNSW
Source SetsAustraliasian Digital Theses Program
LanguageEnglish
Detected LanguageEnglish
Rightshttp://unsworks.unsw.edu.au/copyright, http://unsworks.unsw.edu.au/copyright

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