Social Security, Demographic Trends, and Economic Growth: Theory and Evidence from the International Experience

49 Pages Posted: 7 Sep 2001

See all articles by Isaac Ehrlich

Isaac Ehrlich

State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)

Jinyoung Kim

SUNY at Buffalo, College of Arts & Sciences, Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2003

Abstract

We trace the impact of pay-as-you-go (PAYG) social security taxes on demographic and economic trends through an endogenous-growth model where human capital is the engine of growth, family choices affect its formation in children, and family formation itself is a choice variable. We show that family formation and subsequent decisions by married and single households concerning children and savings are generally adversely affected by the PAYG system. We implement the model using panel data from 57 countries over 32 years (1960-1992). We find that PAYG taxes retard savings and economic growth, and account for a sizeable portion of the downward trends in family formation and fertility around the world.

Keywords: social security, family formation, family choices, economic growth, demographic trend

JEL Classification: J1, O4, H3

Suggested Citation

Ehrlich, Isaac and Kim, Jinyoung, Social Security, Demographic Trends, and Economic Growth: Theory and Evidence from the International Experience (September 2003). Available at SSRN: https://ssrn.com/abstract=279798 or http://dx.doi.org/10.2139/ssrn.279798

Isaac Ehrlich (Contact Author)

State University of New York at Buffalo - Department of Economics ( email )

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HOME PAGE: http://arts-sciences.buffalo.edu/economics/faculty/faculty-directory/ehrlich.html

National Bureau of Economic Research (NBER) ( email )

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University of Chicago - University of Chicago Press ( email )

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Institute for the Study of Labor (IZA) ( email )

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Jinyoung Kim

SUNY at Buffalo, College of Arts & Sciences, Department of Economics ( email )

Buffalo, NY 14260
United States
716-645-2121 (Phone)

HOME PAGE: http://www.economics.buffalo.edu/jinyoung%20kim.html

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