Theo Leers

Social security and endogenous fertility: pensions and child allowances as siamese twins

Abstract This paper analyses public pensions and child support in a model with endogenous fertility. We show that the individual fertility choice may not coincide with the social optimum, due to the existence of external effects of children on society as a whole. The market outcome without government intervention is efficient, however, as the externalities exactly cancel out in that case. If the government wants to redistribute towards the old, it cannot replicate the command optimum by merely applying lump-sum transfers, but rather needs a child allowance scheme to effectively alter the number of offspring. Finally, we analyse whether a Pareto-improving social security reform is possible. It is shown that merely reducing the PAYG-scheme cannot be Pareto-improving, but the introduction of a child allowance scheme can be.

Ageing, migration and endogenous public pensions

Abstract This paper analyses migration behaviour of mobile workers in reaction to population ageing. We show that the conventional wisdom that a decrease in fertility will lead to a rise in wages, and thus to an inflow of immigrants that mitigates the adverse effects of ageing on public pensions, may not hold if labour is heterogeneous. Moreover, we demonstrate that if public pensions are endogenous, i.e., if ageing leads the elderly to successfully lobby for higher taxes, it may take several generations before a steady-state is reached and the initial migration flow may be opposite to the steady-state migration.

The Effects Of Asymmetric Demographic Shocks With Perfect Capital Mobility

In this paper we analyze the effects of asymmetric demographic shocks in a two-region framework with perfectly mobile capital. Regions may differ in their individual thriftiness or the generosity of their social security arrangements. We find that population aging in one region causes international spillover effects. Whether the aging region is a net lender or not appears to be of significant importance. Both the short-run dynamics and the long-run effects of an asymmetric demographic shock are discussed. Special attention is paid to the welfare effects for the different generations residing in either region.

Bureaucracy Versus Markets in Hospital Care: The Dutch Case

In this paper we analyze the bureaucratic negotiation processthat is implied by the budgeting system applied in Dutchhospital care. This system is based on centralized pricesetting while simultaneously allowing for decentralizednegotiations on volumes. We apply a variant of the bureaucracytheory, according to which the bureaucratic agency (in ourcase the joint hospitals) are not allowed to pricediscriminate, but will receive a flat price per unit ofoutput. We find that central price setting, where the insurercannot exploit its information on hospital costs, leads to asuboptimal supply of hospital care.

The Vulnerability of Social Security When Fertility is Endogenous

This paper analyses the effects of rumours and changes in life expectancy in an economywith endogenous fertility and pay-as-you-go (PAYG) pensions. We show that the endogeneity of fertility makes society vulnerable to both pessimistic beliefs and an increasing life span. On the one hand, rumours that pension benefits decrease appear to be self-fulfilling in the short run. On the other hand, increasing longevity deteriorates the PAYG pension scheme both in the short and in the long run, as the number of children permanently declines.

Ageing and Pension Reform in a Small Open Economy: The Role of Savings Incentives

In this paper we analyse the effects of ageing in a small open economy with a representative government. More specific, we adress the question whether in case of ageing a transition from an unfunded to a more funded pension scheme is politically feasible. We show that the existence of a suitable subsidy on savings is crucial in this respect. Without a subsidy on savings, the economy is trapped at the preexisting level of saving and ageing leads to an increase of the PAYG tax. However, if a subsidy exists which is linked to the tax rate in a non-linear way a conversion from PAYG to funded pensions is politically feasible.