200 Index. Kant, Immanuel, 130 Kindererziehungszeiten (Germany), 60 61, 61, 159

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1 Index Aaron condition, 21, 171n.13 Actuarial fairness, xxi, 19, 20, 167 and fertility effect, 103 and intergenerational transfers, Adverse selection, xxii, 82, 135, 168 Agency problem, policy optimization as, See also Child-rearing, as pension qualification Age structure, xvii xviii aging, xvii, 3 4 and income growth (per-capita), xviii, 9 and policy, 4 projected, 4 7 Altruism, 82 evidence against, 116 and intergenerational transfers, 108, 110 Anrechnung von Erziehungszeiten (Germany), 124. See also Kindererziehungszeiten APS (actual policy scenario), 154, 157, 158 Aristotelian ethics, 130 Assets, and family constitution, Asymmetric information, 135, 138, 144 Baby boom, 1, 7 in US, 3, 5, 24 25, 39 Bank of Italy Biannual Household Survey, 118 Benefits in kind, for families and children, 41, Bentham, Jeremy, Beveridge, William, xix, 16 Beveridgean pension system, xix, xx xxi, 16, 94, 95, 96, 103, 170n.4 and intergenerational transfers, 93 and labor, xxi, 102, 149, 166, 167 Binmore, K., 130 Bismarck, Otto von, xxi, 16, 23 Bismarckian pension system, xxi, 16, 21, 94, 95, 96, 102, 103, 149, 150, 166, 167 and intergenerational transfers, 93 British Household Panel Survey, 113 Causation, direction of, 123, 126 CESifo Pension Model, 34, 65 CFP (child-financed pensions), Child benefits, xx, 103, 146 arguments in favor of, difficulties in ending, 147 and fertility, 104, 105, 112, 123 and fertility (reform scenario), 152, and investment in children, 148 and life-cycle decisions, for parents as government agents, in reform scenarios, , 161 and saving, 104, 105, 123 in social optimum, 134 Child care, Child-rearing (investing in human capital), as pension qualification, xx, , 143, , , 159, , See also Pension benefits, child-related Children, public support for. See Public support for children and families with children China, age structure of, xvii Common good, 130 Completed fertility, 1, 3, 156

2 198 Index Constitution(s), 82. See also Family constitutions Contraception, and VAR model for Germany, Contraceptive revolution, xx Cost rates, 24 Coverage, level and extent of, CPI (consumer price indexation) scenario, 154, 157, 158 Credit markets, and family constitution, Credit rationing and child benefits, 146 and family constitution, 116, 117, 118, 120 and life-cycle decisions, 95 97, 102 and personal services, 110 and transfer behavior, Day care, DB (defined benefit schedule), 18, DC (defined contribution schedule), 18, 22 Debt, and pension fund, 17. See also Implicit debt Defined-benefit pension systems, 16 Defined-contribution pension systems, 16 Demographic buffer funds, 25, 31 Demographic variables, and economic policy, 11 Demography, 1 and fertility, 1 4 population projections, 4 9, and US, 37 Denmark, social security scheme from, 23 Dependency, economic connotations of, 9 13 Dependency ratios, 7 9 Developing countries, high fertility of, xviii Domestic interest factor, 87, 89, 91, 110 Domestic investments, 118 in human capital, 136 Dutch Socio-Economic Panel, 112 Dynastic model 105, 121, 126 and child benefits, 105 and credit rationing, 110, 116, 117 and male/female wage rates, 106 and personal services, 109 and relation of income to monetary transfer, 114 and saving, 103, 126 Earned income tax credit (EITC), US, 50 Economist magazine, on US vs. European age structure, xviii Educational subsidies, xx. See also Schooling Endogenous growth theories, 150 Enquête Trois Générations, 113 European Union and Europe, xxii. See also France; Germany; Italy; Sweden; United Kingdom age structure of, xvii, 5 7 baby boom in, 3 central and eastern, 23 fertility and productivity growth in (vs. US), xviii, xix Exchange model, 110, 114 and credit rationing, 117 Fairness, actuarial, xxi, 19, 20, 93 94, 103, 167 Families with children. See also Public support for children and families with children and intergenerational transfers, 82 (see also Intergenerational transfers) Family arrangements. See Intrafamily arrangements Family constitution(s), 82 84, , , 116 and assets or credit markets, and credit rationing, 116, 117, 118, 120 and Italian transfer behavior, 119 and parental altruism, 110 and public transfer system, self-enforcing, 90 92, 120, 133, and reform scenarios, 160 Female and male wage rates and life-cycle decisions, , 152 Fertility and fertility rates, xxviii xix, xx, 1 4, 122, 126 assumptions on, 4, 8, 12 and child benefits, 104, 105, 112, 123 control of (and child subsidy), 58 decline in, 3, 4, 148 and dependency ratios, 12 elasticity of, 80, 125, 163 and female wage rate, 106 and financial viability of public pension systems, 111

3 Index 199 and intergenerational transfers, and life-cycle decisions (pension effects), 98, 98 99, 100, 102, 103 and pension coverage, 149 and pension deficit, 149 and pension reform, xx, 152, , , 163, 168 replacement level of, 3 in VAR model for Germany, and wage rate, 112 Fictitious contributions in Italy, 63 in Sweden, 64 Fondo Pensioni Lavoratori Dipendenti (Italy), Forcing contract, 134, 137, 143, 182n.7 France child-care benefits in, 53 46, 47 child-related pension benefits in, 61 62, 71, and implicit taxes, 35, 37 Régime Général in, 27 28, 61 youth dependency ratio in, 8 Free-riders, and logic of pension schemes, FRP (fertility-related pensions), 160, 161 Fully funded pension scheme, 17, 20 German Socio-Economic Panel (GSOEP), 176n.23, 177n.26 Germany child-care benefits in, child-related pension benefits in, 60 61, 71, 72, fertility in, 3, , , fertility assumptions for, 12 immigration into, 4 implicit taxes in, 36 Kindererziehungszeiten in, 60 61, 61, 159 and relationship between income and child-related cash benefits, 50 Rentenversicherung in, 23, 26, 60 schooling expenditure in, 55 Germany, West reform proposal for, , 168 VAR model for, , 152 Go-it-aloners (family constitution), 86 and child benefits, 105 and credit rationing, 110, 118 and life-cycle decisions, 86, 87, and wage effects, 106, 108 Golden rule of capital accumulation, modified, 131, 133 Government, in principal-agent relationship, Government failure, vs. market failure, 165 Growth, income and financial viability of public pension systems, xvii xviii, 111 and pension crisis, 165 and pension policy, 149, 165 Growth theories, endogenous, 150 Harsanyi, J. C., 130 Health care for children, public provision of, Hobbes, Thomas, 130 Home responsibilities, in UK pension system, 60, 76 Human capital, xviii, 136. See also Childrearing, as pension qualification in endogenous growth theories, 150, 184n.4 and existing pension schemes, 148 and indirect taxation, 168 underinvestment in, 148 Immigration constant flows of assumed, 8 fertility decline offset by, 4 Implicit debt, in public pension schemes, 22, 33 and child-related pension benefits, inherited from past policies (Italy), 37 Implicit subsidy, 19, and deficit/surplus, 103 and fertility, 99, 121, 126 and life-cycle decisions, 102 and life-cycle theory, Implicit tax, 19, 32 39, 58, and deficit/surplus, 103 and fertility, 99, 121

4 200 Index Implicit tax (cont.) and life-cycle decisions, 100, 102 and life-cycle theory, Inaugural gains, 22, 35 Income, and transfer behavior, Income effect, and substitution effect, 112 Income pooling, 116 Indexation in German pension system, 27, 154 in Japan, 31 in US Social Security scheme, 24 Individualism, methodological, 137 In-kind benefits, for families and children, 41, Interest factor, domestic, 87, 89, 91, 110 Interest rate, and total income (industrialized countries), 21 Intergenerational insurance, Intergenerational social welfare function, and actual vs. potential persons, 137 Intergenerational transfer (evidence), 111 macro-data, micro-data, Intergenerational transfer (theory), 81 82, 111 and constitutional theory of family, (see also Family constitution) from disparities of treatment, 39 in fertility-related pension benefits, 162 and implicit taxes, 34 and life-cycle adjustments, 81 (see also Life-cycle decisions) and optimal pension policy, and parental altruism, 110 in pay-as-you-go pensions, 16, 17 18, 22 and personal services, , 135 and public intervention, and uncertainty, Intrafamily arrangements, xxi xxii and credit-rationing, exchanges of money for personal services, 109, vs. public programs, , 144 transfers, 82, Intragenerational transfers, 39 Investments domestic, 118, 136 in human capital, 168 (see also Childrearing, as pension qualification) Italy 46, 47 child-related pension benefits in, 62 63, 71, credit-rationing and monetary transfers in, dependency ratios in, 8 Fondo Pensioni Lavoratori Dipendenti in, fertility in, 3 fertility assumptions for, 12 and implicit tax profile, 35, 37, 39 pension scheme in, 23 and relationship between income and child-related cash benefits, 50, 51 retirement age in, 39 Japan age structure of, xvii, child-related pension benefits in, 65, 71, dependency ratios in, 8 fertility decline in, 3 4 fertility and productivity growth of (vs. US), xviii, xix implicit tax rates in, 37 inaugural gains in, 35 life expectancy in, 4 parental school expenses in, 53 population aging in, 3 4 public pension scheme in, 31 32, 65 and relationship between income and child-related cash benefits, 50, 51 Kant, Immanuel, 130 Kindererziehungszeiten (Germany), 60 61, 61, 159 Laissez-faire equilibria, , 136 Life-cycle decisions, and constitutional theory of family, 82 92

5 Index 201 and intergenerational transfers, 81 (see also at Intergenerational transfer) and parental altruism, 110 and personal services, and public intervention, and uncertainty, Life-cycle theory or model, 83, 86, 121 and child benefits, 105 and exchange model, 114 and male/female wage rates, 106 and personal services, 109 on public pensions and household saving, 111 Life expectancy increase in assumed, 4, 8 and policy, 13 rise in, xxii, 4, 148 uncertainty over, 11 Lifetime utility, 84 Macro-data evidence, on intergenerational transfers, Male and female wage rates and fertility, 112 and life-cycle decisions, Marginal player, 87, 116 Market(s) and individual decisions, xx, xxi xxii and public intervention, 151 and reform scenarios, 160 and social optimum, 132 in three pillars of coverage, 19 Market failure, vs. government failure, 165 Methodological individualism, 137 Micro-data evidence, on intergenerational transfers, Migration, and uncertainty, 4, 11 Mill, John Stuart, Modified golden rule of capital accumulation, 131, 33 Monetary benefits for families with children, Moral hazard and direct transfer schemes, 168 and family-based vs. market- or statebased schemes, xxii and intrafamily transfers, 82 and parent as agent, 141 in population policy, and public compassion as justification, xix Mortality, and policy, xxii NEW (no early withdrawal) scenario, 154, 157, 158 NEWþCPI scenario, 154, 157, 158 North-South divide, xvii Notionally defined contributions (NDC), 18, 64, 159 Occupational pensions, 112, 146 Old-age dependency ratios, 7 9, 11 Optimal policy, as principal-agent problem, in simple framework, Panel Study of Income Dynamics, 113 Parents, as government agents, Pareto optimality, 34 and quasi-pareto criterion, 91 Pay-as-you-go pension systems, xvii xviii, 16 17, 144, 165 and implicit tax, (see also Implicit tax) and intergenerational redistribution, 22 pure, 20 as unchangeable, 147 Pension(s), private, and actuarial fairness, 19 Pension(s), public, and age structure, xvii xviii algebra of, benefits vs. contributions in, 16 Beveridgean system of, xix, xx xxi, 16, 93, 94, 95, 96, 102, 103, 149, 166, 170n.4 Bismarckian system of, xxi, 16, 21, 93, 94, 95, 96, 102, 103, 149, 150, 166 coverage, deficit, 103, , and disincentive to work, xxi causation of effect on fertility and saving, 123, 126 estimating effects of, 112 and family constitution, 135 and fertility, xviii xix, xx, 122, 126, 149 (see also Fertility and fertility rates) in financial crisis, 1, 165 and growth, xvii xviii, 111, 165 and human capital investment, 148 (see also Human capital) and implicit tax, 19, 32 39, 58, (see also Implicit tax)

6 202 Index Pension(s), public (cont.) incentive effects of, xx justification(s) for, xix xxii, , 147 (see also Pensions, public, in social optimum) and life-cycle decisions, (see also Life-cycle decisions) and parents as agents of government, and private investment, 158 and productivity growth, xviii questions on, 127, 129 reductions in assumed, 11 and retirement age, xxii, 39, 148, and saving, 111, 122, 126, , 149 (see also Saving, household) in selected countries, in social optimum, unalterability of, 147 and voluntary saving, 112 Pension benefits, child-related, 57 59, 65 66, 127 baseline case effects of, and departure from baseline (alternative work patterns), 67, and departure from baseline (different earning abilities), 67, and departure from baseline (different numbers of children), 67, and existing entitlements, 79 in policy proposals, , , , 159, , 166 and public debt, in selected countries, women s wage profiles and stylized biographies in assessing, Pension policy reform (from anew), 127, 147 and growth rate, and human capital, 136 laissez-faire solution, , 136 and moral hazard (population policy), optimization of in simple framework, parallel-scheme systems (with child benefits), 134, 143, , , 162, 166 with parents as child-rearing agents of government, , (see also Child-rearing) and uncertainty over individual actions, 136 Pension policy reform (from existing), , 159, 165 with aim of parental investment in children, 145, 151, 168 (see also Childrearing, as pension qualification) as centered on retirement/work disincentive over disincentive to have children, 167 cutting back, 147, and existing flaws, 148 and fertility effects, , 168 and growth rate, 151 increased intervention, 166 linking of pension entitlement to earning abilities of own children, 143, linking of pension entitlement to individual fertility, and saving effects, , 168 scenarios for, , 160 Pension wealth, disparities in, 111 Personal services, and intergenerational transfers, 108, , , 135 Pigovian subsidy, 134 Policy optimization. See Optimal policy Population aging in Japan, 3 4 as problem, xvii in US, 3 Population policy, moral hazard in, Population profile, determination of, Population projections, 4 9, Population pyramid, 5 Predefined benefit schedule (DB), 18, Predefined contribution schedule (DC), 18, 22 Pre-funded pensions, 16 Principal-agent problem, policy optimization as, Privatization, of old-age Social Security (US), 25 Productivity growth, and public pensions, xviii Projected age structures, 4 7 Public expenditure, and dependency ratios, 9 13 Public housing, low-cost, 51

7 Index 203 Public intervention, and intergenerational transfers, Public pensions. See Pension(s), public Public support for children and families with children, See also Child benefits calculation of value of, 56 as cash benefits, as in-kind benefits, and parents with different earnings, and parents with different numbers of children, Public support for the old. See Pension(s), public Quasi-Pareto criterion, 91 Reform of pension policy. See at Pension policy reform Régime Général (France), 27 28, 61 Rentenversicherung (Germany), 23, 26, 60 Rent subsidies, 51 Replacement level of fertility, 3 Replacement rate, and German pension system, 27 Retirement age, xxii, 39, 148, Risk intergenerational allocation of, 18 and pension policy, 146, 152 Risk aversion, 138, 146 Samuelson, Paul, 81 82, 84 Saving, household, xiii xix, 111, 122, 126 and child benefits, 104, 105, 123 and financial viability of public pension systems, 111 and logic of pension schemes, and pension coverage, 149 and pension deficit, 149 and pension reform, , 168 Scandinavian countries, multi-pillar schemes in, 23 Schooling, as in-kind benefit, Single mothers, 47, 71 72, 178n.35 Social assistance, 43 and child benefits, 48 Social contrivances, Samuelson on, Social insurance, 16, 21, 23, and child-related pension benefits, 58, 62, 79 in France, 27 in Germany, 26 and married woman s labor force participation, 71 Social optima, Social security, 16, 23, 57 and child-related pension benefits, 79, 79 and married women, 71 Social Security system (US), and child-rearing benefits, 59 Social security tax, 95. See also Implicit tax Spouse and survivor benefits, 58 60, 70 State, and intergenerational transfers, 82 Subsidy, xxi educational, 168 implicit, 19, (see also Implicit subsidy) Pigovian, 134 via price system, 183n.23 in support of children and families, 41 Substitution effect, and income effect, 112 Supplementary earnings-related pension benefits (SERPS), for UK, 25 Survivor and spouse benefits, 58 60, 70 Sweden 47 child-related pension benefits in, 64, 71, fertility in, 3 implicit tax rates in, 37 parental school expenses in, 53 public pension scheme in, 23, 30 and relationship between income and child-related cash benefits, 50 schooling expenditure in, 55 total dependency ratios in, 9 youth dependency ratio in, 8 Tax(ation) Beveridge pension scheme as, xx xxi, 166, 167 implicit, 19, 32 39, 58, (see also Implicit tax) social security, 16, 95 Tax allowances, as public support for children and families, 41, 43, 50, 53 Tax-to-GDP ratio, 11

8 204 Index Three pillars of pension coverage, 19, 35 Total dependency ratios, 7 9 youth- vs. old-age ratios in, 9 10 Total fertility rate, 1, 3, 155 Transfers in kind, for families and children, 41, Uncertainty over individual behavior, 136 and intergenerational transfers, of pensions vs. child benefits, 146 United Kingdom, 23, 25 26, 60 and Beveridgean system, xix (see also Beveridgean pension system) 46, 47 child-related pension benefits in, 60, 70, 71, day-care costs in, 53 earnings-related tier (SERPS) in, 23 fertility in, 12 implicit taxes in, 37 pension scheme of, 23 private school role in, 54 redistribution through public pensions in, 23 and relationship between income and child-related cash benefits, 50, schooling expenditure in, 54 total dependency ratios in, 9 welfare system redesign in, 48 youth dependency ratio in, 8 United States age structure of, xvii aging population in, 3 baby boom in, 3, 5, 24 25, 39 child-related monetary benefits in, 46, 47 and child-related pension benefits, 59, 70, 71, day-care costs in, 53 dependency ratios in, 8 fertility in, 1, 3 and fertility and productivity growth (vs. European Union or Japan), xviii, xix immigration into, 4 and implicit taxes, 35, 37 population projection for, 5 private school role in, 54 redistribution through public pensions in, 23 and relationship between income and child-related cash benefits, 50 Social Security scheme in, tax allowances in, 43 total dependency ratios in, 9 welfare system redesign in, 48 Utilitarianism, , 137 Utility, lifetime, 84 Vector autoregressive (VAR) model, for West Germany, , 152 Welfare assessments, and actual vs. potential persons, 137 Welfare to work in Italy, 50 in United Kingdom, 43, 50 in United States, 50 West Germany. See Germany, West Youth dependency ratio, 8