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Demographic change, PAYG pensions and child policies

Published online by Cambridge University Press:  20 December 2016

PETER JOSEF STAUVERMANN  and
RONALD RAVINESH KUMAR Open the ORCID record for RONALD RAVINESH KUMAR [Opens in a new window]
PETER JOSEF STAUVERMANN
Affiliation:
School of Global Business & Economics, Changwon National University, Gyeongnam, 9, Sarim Dong, 641-773 Changwon, Republic of Korea (e-mails: pstauvermann@t-online.de; pjsta@changwon.ac.kr)
RONALD RAVINESH KUMAR
Affiliation:
QUT Business School, Queensland University of Technology, Brisbane, Queensland, Australia School of Accounting & Finance, University of the South Pacific, Suva, Fiji Bolton Business School, University of Bolton, Deane Road, Bolton BL3 5AB, UK (e-mails: ronald.kumar@qut.edu.au; kumar_RN@usp.ac.fj; rrk1mpo@bolton,ac.uk; ronaldkmr15@gmail.com)
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Abstract

The aim of the paper is to investigate how child policies affect the population growth and to what extent these policies are useful to increase pension benefits of a pay-as-you-go pension system in a small open economy. Specifically, we analyze two different child policies: the provision of child allowances and an educational subsidy. We apply an overlapping generations model in its canonical form, where we consider endogenous fertility, endogenous growth and endogenous aging of the society. From the analysis, we conclude that with a child allowance, there is a consequent increase in the number of children and decrease in pension benefits and life expectancy. On the other hand, we note that with an educational subsidy, there is a decrease in the number of children, and an increase in the pension benefits and the life expectancy, respectively. The model developed aims to complement the models of the Unified Growth Theory.

Keywords

D10E62H23H55J13O15O41OLG modelPAYG pension systemchild allowancesfertilityhuman capitalsubsidy for education
Type
Article
Information
Journal of Pension Economics & Finance , Volume 17 , Issue 4 , October 2018 , pp. 469 - 487
Copyright
Copyright © Cambridge University Press 2016 

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Footnotes

Peter J. Stauvermann acknowledges thankfully the financial support of the Changwon National University 2015–2017. Also, both authors sincerely thank the editor and the anonymous reviewers for their helpful comments and advice. The usual disclaimer applies.

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