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

23 Pages Posted: 7 Feb 2007  

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

Korea University - Department of Economics

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.

Keywords: Social security, Family, Human capital, Marriage, Divorce, Fertility, Saving, Growth, Public pension

JEL Classification: J1, O1

Suggested Citation

Ehrlich, Isaac and Kim, Jinyoung, Social Security and Demographic Trends: Theory and Evidence from the International Experience. Review of Economic Dynamics, Vol. 10, No. 1, pp. 55-77, January 2007. Available at SSRN: https://ssrn.com/abstract=961270

Isaac Ehrlich (Contact Author)

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

415 Fronczak Hall
Buffalo, NY 14260
United States
716-645 2121 (Phone)
716-645 2127 (Fax)

HOME PAGE: http://economics.buffalo.edu/people/ehrlich/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Chicago - University of Chicago Press ( email )

1427 E. 60th Street
Chicago, IL 60637
United States

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

P.O. Box 7240
Bonn, D-53072
Germany

Jinyoung Kim

Korea University - Department of Economics ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea

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