Cipriani, Giam Pietro and Makris, Miltiadis
PAYG pensions and human capital accumulation: some unpleasant arithmetic
The Manchester School (doi:10.1111/j.1467-9957.2011.02251.x).
- Author's Original
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A large literature has studied the effects of PAYG systems on fertility, human capital and growth. We argue that the social security system may also interact with longevity when the latter is endogenously determined. We show that in such an environment, in a dynamically effcient economy PAYG pensions must be suffciently low in order to ensure positive economic growth. Moreover, a transition to a funded social security system will promote growth, and can thereby take place by fully compensating the losers.
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