Endogenous Demographic Change, Retirement, and Social Security

Abstract

In this paper, we analyze the effects of demographic change on a pay-as-you-go (PAYG) pension system, financed with a defined contribution scheme. In particular, we examine the relationship between retirement, fertility, and pensions in a three-period overlapping generations model. We focus on both the case of mandatory retirement and the case where the retirement age is freely chosen. In the case of mandatory retirement, increasing longevity has an unambiguously negative impact on fertility and pension payouts and a positive effect on the level of physical capital in the steady state. On the other hand, when agents choose the time of retirement, an increase in life expectancy positively affects physical capital only when the tax rate is sufficiently low and can have a positive impact on pension benefits, because agents may find it optimal to retire later and to decrease fertility less. Finally, the effects of the social security tax on capital per worker are negative with mandatory retirement; however, they could be positive in the optimal retirement case.

Pay-as-You-Go Social Security and Educational Subsidy in an Overlapping Generations Model with Endogenous Fertility and Endogenous Retirement

“…They show that when retirement age is determined endogenously, the fertility rate at equilibrium depends on the pension tax rate. In our model, when an old agent supplies positive labor, the fertility rate at equilibrium is neutral to the tax rate, which is different from the result shown in Cipriani and Fioroni (2021). This difference suggests that a choice between an exogenous growth setting and an endogenous growth setting with endogenous retirement can be important when policy effects are considered.…”

“…Our results suggest that endogenizing an old agent's retirement age may affect the relationship between the pay-as-you-go social security tax rate and the fertility rate. Meanwhile, Hu (1979), Momota (2003), Fenge and Pestieau (2005), Michel and Pestieau (2013), Chen (2018), Miyazaki (2019), Cipriani and Fioroni (2021), and others analyze the relationship between pay-asyou-go social security and an old agent's labor supply or decision regarding retirement. Hu (1979) andMomota (2003) investigate how the length of the retirement period changes at equilibrium as the pension tax rate and pension benefits change, although they do not consider the case of no labor supply for old agents.…”

“…Chen (2018) examine the effects of fertility and retirement age on long-run pay-as-you-go pensions and show that the effects depend on whether retirement age is exogenously given. Recently, Cipriani and Fioroni (2021) examined how exogenous longevity affects fertility, retirement, and pensions in an OLG model with an exogenous growth setting. They show that when retirement age is determined endogenously, the fertility rate at equilibrium depends on the pension tax rate.…”

A Relevância e os Desafios da Indústria de Seguros na Administração Contemporânea: Um Chamamento aos Pesquisadores

“…Junte-se o fato de que as alterações demográficas verificadas nos últimos cinquenta anos vêm apresentando taxas decrescentes de natalidade de uma série de nações (e o Brasil não é diferente). Em sentido oposto, são observados sucessivos crescimentos da longevidade média, justificados pelo desenvolvimento tecnológico e pela mudança de comportamentos a respeito da prevenção de doenças, ambos atributos que contribuem para ampliação da vida humana (Cipriani & Fioroni, 2019).…”

The Relevance and Challenges of the Insurance Industry in Contemporary Administration: A Call for Researchers

“…This has been combined with an intense decrease in the birth rate for a great number of nations (and Brazil is no different). On the other hand, average life expectancy has increased due to technological development and changes in people's behavior in terms of preventing diseases, which have extended the human lifespan (Cipriani & Fioroni, 2019).…”