How Should the Allocation of Resources Adjust to the Baby Bust?

Authors: David De La Croix¹; Géraldine Mahieu²; Alexandra Rillaers³

Source: Journal of Public Economic Theory, Volume 6, Number 4, October 2004 , pp. 607-636(30)

Buy & download fulltext article:

Price: $48.00 plus tax (Refund Policy)

Abstract:

We analyze the impact of a drop in fertility on the optimal allocation of resources in an overlapping generations economy where old workers care about leisure. We also characterize optimal dynamics and study the decentralization of the optimum by means of inter-generational transfers and/or public debt. We conclude that the policy recommendations of postponing retirement is fragile and depend on preferences and technologies. Also, even when the optimal adjustment of public debt goes into the expected direction in the long run—i.e., public debt should decrease—this may not be the case during the transition.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-9779.2004.00183.x

Affiliations: 1: Université catholique de Louvain 2: National Bank of Belgium 3: Universidad de Alicante

Publication date: 2004-10-01