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- Title
PAY-AS-YOU-GO PENSION, HUMAN CAPITAL ACCUMULATION AND ECONOMIC GROWTH.
- Authors
Kei Murata
- Abstract
In this paper, we consider the interaction between pay-as-you-go pension and economic growth patterns by an overlapping-generations model mainly based on Groezen, Leers, and Mejidam (2003) and Cardak (2004). Groezen, Leers, and Mejidam (2003) considers a small open economy, where individual's income level equals to the wage rate. They assume that an individual's utility level is determined only by his own consumption levels in the model's second and third periods and by the number of children he has. In this paper, we also consider human capital accumulation and assume that income level is determined not only by the wage rate but also by the individual's human capital level. We assume that the individual's human capital level is determined by their parental human capital level and educational expenditure by his parent. The individual's utility level is influenced by the educational expenditure on children, which depends on Glomm and Ravikumar (1992) and Cardak (2004a, 2004b). These two references assume that population size in a period is constant. In this paper, however, we assume that the number of children is determined by the individual to maximize his utility, which means a variable population size. This assumption has an influence on the educational expenditure. Japan is known as an aging society, and the Japanese government has raised pension insurance rate to improve social security. We find that this policy has both positive and negative effects on economic growth in the economy.
- Subjects
HUMAN capital; SAVINGS; PENSIONS; FREE trade; INCOME; WAGES; SOCIAL security &; economics
- Publication
Global Business & Economics Anthology, 2016, Vol 2, p253
- ISSN
1553-1392
- Publication type
Article