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

Prinz, Aloys

doi:10.1007/bf00163074

“…Becker 1960Becker , 1988Becker , 1991 and in broader discussions on the fertility decline in advanced economies. 1 In the public finance literature, it is well-established that the link between fertility and the public provision of pension insurance can be considered a special case of the social security hypothesis (Bental 1989;Prinz 1990;Cigno 1993;Cigno and Rosati 1996;Sinn 2004;Fenge and Meier 2005;Cigno and Werding 2007;Cremer et al 2008). Recently, the link between pensions and fertility has received increasing attention, also in the historical context of the first demographic transition (Guinnane 2011).…”

Section: Introductionmentioning

confidence: 99%

Pensions and fertility: back to the roots

Fenge

¹

,

Scheubel

²

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Fertility has long been declining in industrialised countries and the existence of public pension systems is considered as one of the causes. This paper provides detailed evidence on the mechanism by which a public pension system depresses fertility, based on historical data. Our theoretical framework highlights that the effect of a public pension system on fertility is ex ante ambiguous while its size is determined by the internal rate of return of the pension system. We identify an overall negative effect of the introduction of pension insurance on fertility using regional variation across 23 provinces of Imperial Germany in key variables of Bismarck's pension system, which was introduced in Imperial Germany in 1891. The negative effect on fertility is robust to controlling for the traditional determinants of the first demographic transition as well as to other policy changes. Terms of use: Documents in EconStor may

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“…Moreover, in a pay-as-you-go pension system, children constitute a fiscal externality (e.g. Prinz 1990;Kolmar 1997;van Groezen et al 2003;Sinn 2004;von Auer and Büttner 2004;Fenge and Meier 2009;Meier and Wrede 2010), i.e. the incentive to have children is further reduced because other children would pay an individual's pension once there is credible enforcement by the state.…”

Section: Discussionmentioning

confidence: 99%

“…Abio et al 2004) or in overlapping generation models (e.g. Prinz 1990;Cigno 1993;Cigno and Rosati 1996;Sinn 2004;Fenge and Meier 2005;Cremer et al 2008). We have developed our model in the spirit of Cigno (1993); thus it can be considered part of the literature focusing on microeconomic explanations for fertility behaviour.…”

Section: Introductionmentioning

confidence: 99%

Pensions and Fertility: Back to the Roots - The Introduction of Bismarck's Pension Scheme and the European Fertility Decline

Fenge,

Scheubel

2013

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractFertility has long been declining in industrialised countries and the existence of public pension systems is considered as one of the causes. This paper provides detailed evidence based on historical data on the mechanism by which a public pension system depresses fertility. Our theoretical framework highlights that the effect of a public pension system on fertility works via the impact of contributions in such a system on disposable income as well as via the impact on future disposable income that is related to the internal rate of return of the pension system. Drawing on a unique historical data set which allows us to measure these variables at a jurisdictional level for a time when comprehensive social security was introduced, we estimate the effects predicted by the model. We find that beyond the traditional determinants of the first demographic transition, a lower internal rate of return of the pension system is associated with a higher birth rate. This result is robust to including the traditional determinants of the first demographic transition as controls as well as to other policy changes at the time.Keywords: public pension, fertility, transition theory, historical data, social security hypothesis, first demographic transition JEL-Codes: C21, H31, H53, H55, J13, J18, J26, N33ECB Working Paper 1734, September 2014 1 Non-technical summaryAn ageing population is considered one of the major challenges for developed economies.To deal with population change, its causes have to be understood. One major cause for population change -the existence of the welfare state -has received comparatively little attention in the recent academic debate. This paper tries to fill this gap by analysing the link between social security and fertility in a theoretical model and by testing the model implications with historical data. To most economists, it is clear that social insurance provision as well as social insurance contributions trigger changes in behaviour, for example in the labour supply decision. This link between social security and individual behaviour has been postulated as the so-called social security hypothesis which states that the individual provision for the major risks of life -sickness, accidents, poverty -declines whenever the state provides insurance against these risks. Therefore, it may seem surprising that the link between social security and other changes in individual behaviour, such as fertility, has recei...

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“…The theoretical effects of pension systems on fertility have been studied extensively. Early work includes Bental (1989), Cigno (1991), and Prinz (1990) in addition to the original discussion in Becker and Barro (1988). More recent examples include Nishimura and Zhang (1992), Cigno and Rosati (1992), Cigno (1995), , Swidler (1981Swidler ( , 1983, Wigger (1999), Yakita (2001), Yoon and Talmain (2001), Zhang (2001), and Zhang, Zhang, and Lee (2001), among others.…”

Section: Relation With Earlier Workmentioning

confidence: 99%

Fertility and Social Security

Boldrin¹,

Nardi

²

,

Jones

³

2005

Preprint

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The data show that an increase in government provided old-age pensions is strongly correlated with a reduction in fertility. What type of model is consistent with this finding? We explore this question using two models of fertility: one by Barro and Becker (1989), and one inspired by Caldwell (1978, 1982) and developed by Boldrin and Jones (2002). In Barro and Becker's model parents have children because they perceive their children's lives as a continuation of their own. In Boldrin and Jones' framework parents procreate because children care about their parents' utility, and thus provide them with old-age transfers. The effect of increases in government provided pensions on fertility in the Barro and Becker model is very small, whereas the effect on fertility in the Boldrin and Jones model is sizeable and accounts for between 55 and 65% of the observed Europe-U.S. fertility differences both across countries and across time.

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

Cited by 12 publications

References 9 publications

Pensions and fertility: back to the roots

Pensions and fertility: back to the roots

Pensions and Fertility: Back to the Roots - The Introduction of Bismarck's Pension Scheme and the European Fertility Decline

Fertility and Social Security

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