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2008•RePEc: Research Papers in EconomicsRequires access

PAYG pensions and economic cycles: exogenous versus endogenous fertility

Luciano Fanti, Luca Gori

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Abstract

We analyse the dynamics of an overlapping generations economy with unfunded pay-as-you-go public pensions and myopic expectations by comparing exogenous and endogenous fertility contexts. It is shown that large PAYG pensions may cause endogenous fluctuations in both cases. However, ceteris paribus, when the number of children is an economic decision variable the economy is much more prone to cyclical instability and deterministic chaos emerges.

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We analyse the dynamics of an overlapping generations economy with unfunded pay-as-you-go public pensions and myopic expectations by comparing exogenous and endogenous fertility contexts. It is shown that large PAYG pensions may cause endogenous fluctuations in both cases. However, ceteris paribus, when the number of children is an economic decision variable the economy is much more prone to cyclical instability and deterministic chaos emerges.

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Available abstract

We analyse the dynamics of an overlapping generations economy with unfunded pay-as-you-go public pensions and myopic expectations by comparing exogenous and endogenous fertility contexts. It is shown that large PAYG pensions may cause endogenous fluctuations in both cases. However, ceteris paribus, when the number of children is an economic decision variable the economy is much more prone to cyclical instability and deterministic chaos emerges.

Key concepts: Economics, Ceteris paribus, Overlapping generations model, Fertility, Labour economics, Monetary economics, Microeconomics, Sociology

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