Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/196742 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12244
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
In this paper, we analyse the effects of demographic change on a 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.
Subjects: 
PAYG pensions
endogenous fertility
aging
retirement
JEL: 
J13
H2
H8
H55
Document Type: 
Working Paper

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