Social security and demographic trends: Theory and evidence from the international experience

Isaac Ehrlich, Jinyoung Kim

Research output: Contribution to journalArticlepeer-review

33 Citations (Scopus)

Abstract

The worldwide problem with pay-as-you-go, defined-benefits social security systems is not just financial. Through a dynamic, overlapping-generations model where forming a family and bearing and educating children are choice variables, we show that social security taxes and benefits generate incentives to reduce both family formation and fertility, and that these effects cannot be fully neutralized by counteracting inter-temporal or intergenerational transfers within families. We implement the model using calibrated simulations as well as panel data from 57 countries over 32 years. We find that PAYG tax measures account for a non-trivial part of the downward trends in family formation and fertility worldwide, especially in OECD countries.

Original languageEnglish
Pages (from-to)55-77
Number of pages23
JournalReview of Economic Dynamics
Volume10
Issue number1
DOIs
Publication statusPublished - 2007 Jan

Keywords

  • Divorce
  • Family
  • Fertility
  • Growth
  • Human capital
  • Marriage
  • Pay-as-you-go
  • Public pension
  • Saving
  • Social security

ASJC Scopus subject areas

  • Economics and Econometrics

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