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PAYG PENSIONS AND HUMAN CAPITAL ACCUMULATION: SOME UNPLEASANT ARITHMETIC *
Author(s) -
CIPRIANI GIAM PIETRO,
MAKRIS MILTIADIS
Publication year - 2012
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2011.02251.x
Subject(s) - social security , economics , human capital , order (exchange) , overlapping generations model , capital accumulation , capital (architecture) , growth model , microeconomics , labour economics , economic system , market economy , finance , archaeology , history
A large literature has studied the effects of Pay‐As‐You‐Go (PAYG) systems on fertility, human capital and growth. We argue that the social security system may also interact with longevity when the latter is endogenously determined. We show that in such an environment, in a dynamically efficient economy PAYG pensions must be sufficiently low in order to ensure positive economic growth. Moreover, a transition to a funded social security system will promote growth, and can thereby take place by fully compensating the losers.