In this paper we consider the effects of population aging on a pay-as-you-go financed defined contributions pension scheme. We show that when retirement decisions are endogenous, aging increases the retirement age and the steady state level of capital. The effect on pension payouts is in general...

This paper analyzes and compares the macroeconomic performance of defined-benefit and defined-contribution pay-as-you-go pension systems when population ages. When the fertility rate decreases or longevity rises, it is shown that a shift from defined benefit (defined total benefit or defined...

The currently observed demographic change consists of two independent developments that differ in structure and persistence: (1) A slow, monotonic and (presumably) permanent ageing effect caused by an increasing life expectancy; (2) a more rapidly changing, non-monotonic and less permanent...

In this paper, we analyse the effects of demographic change on a PAYG pension system, financed with a defined contribution scheme. In particular we examine the relationship between retirement, fertility and pensions in a three-period overlapping generations model. We focus on both the case of...

The aim of this paper is to analyze a particular demographic risk in pay-as-you-go (PAYG) pension funds. We focus on the influence of the demographic variable 'new entrants' and on its impact on the future evolution of the fund. The model adapts well to a closed pension fund which operates...

This paper presents four policy options to make Social Security sustainable under the coming demographic shift: 1) increase payroll taxes by 6 percentage points, 2) reduce the replacement rates of the benefit formula by one-third, 3) raise the normal retirement age from sixty-six to...

This paper studies the effect of demographic change on national saving, global interest rates, and international capital flows, focusing on the role of the public pension system. We develop a small open economy overlapping generations model to illustrate the channels through which demographic...

The paper investigates the impacts of demographic change on the financial sustainability of a pay-as-you-go social security system in an economy with unemployment caused by trade unions. Using a simple two-period overlapping generations approach, it can be shown that the trade union behavior...

We set up an overlapping generations model with endogenous fertility to study pensions policies in an ageing economy. We show that an increasing life expectancy may not be detrimental for the economy or the pension system itself. On the other hand, conventional policy measures, such as...