Year: 2021
Type: article
Abstract: This paper studies retirement and child support policies in a small, open, overlapping-generations economy with PAYG social security and endogenous retirement and fertility decisions. It demonstrates that neither fertility nor retirement choices necessarily coincide with socially optimal allocation, because agents do not take into account the externalities of fertility and the elderly labor supply in the economy as a whole. It shows that governments can realize the first-best allocation by introducing a child allowance scheme and a subsidy to incentivize the labor supply of older workers. As an alternative to subsidizing the elderly labor supply, we show that the first-best allocation can also be achieved by controlling the retirement age. Finally, the model is simulated in order to study whether the policies devoted to realizing the social optimum in a market economy could be a Pareto improvement.
Authors: Giam Pietro Cipriani, Tamara Fioroni
Institution: University of Verona
Language: English
Subfield: Demography
Field: Social Sciences
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,162
OpenAlex ID: W3135835115