NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Pay-As-You-Go Pension System as a Fertility Insurance and Enforcement Device

Hans-Werner Sinn

NBER Working Paper No. 6610
Issued in June 1998
NBER Program(s):   PE

It is argued that a PAYGO system may have useful allocative functions in that it serves as an insurance against not having children and as an enforcement device for rotten kid' who are unwilling to pay their parents a pension. It is true that the system has amoral hazard effect in terms of reducing the investment in human capital, but, if it is run on a sufficiently small scale this effect will not strong enough to prevent a welfare improvement. If scale of the system is so large that parents bequeath some of their pensions to their children overdrawn and creates unnecessarily strong disincentives for human capital investment.

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Document Object Identifier (DOI): 10.3386/w6610

Published: Sinn, Hans-Werner. "The Pay-as-You-Go Pension System As Fertility Insurance And An Enforcement Device," Journal of Public Economics, 2004, v88(7-8,Jul), 1335-1357.

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