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Why Child Allowances Fail to Solve the Pension Problem of Aging Societies

1
School of Global Business & Economics, Changwon National University, Changwon 641-773, Korea
2
Department of Business, IUBH University of Applied Sciences, Rheinlanddamm 201, 44139 Dortmund, Germany
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Author to whom correspondence should be addressed.
Economies 2019, 7(4), 117; https://doi.org/10.3390/economies7040117
Received: 30 May 2019 / Revised: 25 November 2019 / Accepted: 2 December 2019 / Published: 5 December 2019
The aim of the paper is to investigate how child allowances affect population growth and pension benefits of pay-as-you-go (PAYG) pension systems in small open and closed economies. We apply an overlapping-generations (OLG) model in its canonical form, where we consider endogenous fertility and growth generated by human capital accumulation. From the analysis, we conclude that in a small open economy, child allowances increase the number of children, yet decrease pension benefits over the long run. If we consider a closed economy, the effect of child allowances on fertility is ambiguous and remains negative on pension benefits over the long run. View Full-Text
Keywords: OLG model; PAYG pension system; child allowances; fertility; human capital OLG model; PAYG pension system; child allowances; fertility; human capital
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Stauvermann, P.J.; Wernitz, F. Why Child Allowances Fail to Solve the Pension Problem of Aging Societies. Economies 2019, 7, 117.

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