1,721,072 research outputs found
Regulated wage economy and taxation systems: a long-run welfare and growth theoretical analysis and a policy exercise
No full textAre the regulation of wages and unemployment always detrimental for economic growth?
No full textAlthough the debate about the effects of the regulation of wages is long lasting, little attention has been paid to the role played by minimum wages in inter-temporal contexts with endogenous fertility. This paper investigates such effects within a standard OLG model of neoclassical growth. Some new results, so far escaped closer scrutiny, emerge: introducing a regulated wage may, despite the unemployment occurrence, (i) have a favourable impact on both capital accumulation and output per capita; (ii) reduce the population growth rate. This occurs more likely when a sufficiently high capital share as well as significant unemployment benefits do coexist. Moreover we show that such results also hold even with exogenous fertility and lump-sum taxation on the elderly. Therefore, we conclude that under suitable conditions the Stigler’s (1946) result that the regulation of wages always causes a production loss may be violated, that is, in a dynamical context a regulated-wage economy may perform better than a market-wage economy, and the higher is the unemployment rate the higher is the (neoclassical) economic growth. Furthermore, we argue that the minimum wage may also be treated as a policy parameter to control population growth
Fertility and PAYG pensions and in the overlapping generations model
No full textThis article analyses how long-run pay-as-you-go public pensions
react to a change in fertility in the Diamond overlapping generations model. While it might seem well established both in academic and political debates that the decline in fertility represents a “demographic time bomb” for the sustainability of public pensions, it is shown that a falling birth rate need not necessarily cause the fall of pensions in the long run
Longevity and PAYG pension systems sustainability
No full textIn this paper we study the effects of an increasing longevity on the balanced pay-as-you-go pension budget in the basic overlapping generations model of growth (Diamond, 1965). It is
shown that, when the capital’s share in production is sufficiently high, the higher longevity the higher pension benefits. The policy implication is that there would be room for an increase, rather than the often threatened reduction, in future pension payments, by keeping unaltered the contribution rate paid by the young to finance pensions to retired people as well as a balanced PAYG pension budget
PAYG pensions, tax-cum-subsidy and A–Pareto efficiency
No full textAn overlapping generations small open economy with endogenous fertility and time cost of children is analysed to show that the command optimum can be decentralised in a market setting using a PAYG transfer from the young to the old and a tax-cum-subsidy policy (i.e., a linear wage tax on labour income collected and rebated in a lump-sum way within the younger working-age generation). Indeed, the latter instrument stimulates fertility and then reduces the opportunity cost of children. Moreover, by applying the generalised notion of Pareto efficiency introduced by Golosov et al. (2007) in a context of endogenous population, some normative conclusions can be drawn: since only the utilities of those who are actually born are evaluated in each state of the world, we apply the concept of A–efficiency and conclude that when PAYG pensions are in existence, the tax-cum-subsidy policy can effectively be used as an alternative to the child allowance to internalise the externality of children, while also representing an A–Pareto improvement
Economic growth and welfare in a neoclassical OLG growth model with minimum wages and consumption taxes
No full textWe examine the effects of minimum wages on both the long-run per worker GDP and welfare in the textbook Diamond style overlapping generations economy. In addition, we assume the existence of unemployment benefits financed at a balanced budget with consumption taxes. Under suitable conditions, it is shown that a regulated-wage economy with unemployment performs better than a competitive-wage economy with full employment in the long run. Moreover, a welfare-maximizing
minimum wage exists. Our findings may have interesting policy implications
Child policy ineffectiveness in an overlapping generations small open economy with human capital accumulation and public education
No full textMotivated by the recent decrease in the number of children experienced in several developed countries, in this paper we consider a small open economy model with overlapping generations, endogenous fertility and human capital formation through public education, and look at the role the government can play in affecting fertility through the widely used child allowance policy. Contrary to conventional view, we show that the public provision of child allowances is fertility-neutral in the long run, that is it is not effective as a pronatalist policy, while also reducing human capital accumulation. In contrast, the financing of the public education system is beneficial to both fertility and human capital. These results hold in the cases of both fixed and time cost of children
Public education, fertility incentives, neoclassical economic growth and welfare
No full textUsing a simple overlapping generations model of neoclassical growth, we analyse the effects of both child allowances and the system of public education on the rate of fertility, the per capita income and the individual lifetime welfare. The essential message of the present paper is that developed countries plagued by below-replacement fertility and income stagnation may raise per capita income and the rate of fertility at the same time by increasing the public education expenditure rather than by resorting to child allowances. The latter, in fact, are found to be harmful for long-run neoclassical economic growth and, in contrast with the common belief, for the rate of population growth as well. Moreover, welfare analysis has shown the existence of a Pareto-efficient welfare-maximizing educational contribution rate
Public expenditure on health and private old-age insurance in an OLG growth model with endogenous fertility: chaotic dynamics under perfect foresight
No full textThis study analyses the dynamics of an economy with overlapping generations, endogenous population (fertility and adult mortality), logarithmic preferences and Cobb–Douglas technology. We show that the public provision of health investments and the existence of a private system of old-age insurance (i.e., transfers from children to parents) may cause the birth and death of multiple (three) steady states, deterministic chaos and bubbling phenomena when individuals have perfect foresight. Interestingly, however, we show that periodic dynamics (cycles) or complex dynamics (chaos) and global stability of the economy can endogenously be reconciled in the model, because the rise either in public health investments or transfers from young to old people can have the potential to smooth and ultimately suppress endogenous fluctuations in the cases of existence of both a single steady state or multiple steady states
Child quality choice and fertility disincentives
No full textThis paper analyses the effects of the introduction of child-subsidy support policies extending recent overlapping generations (OLG) models to account for endogenous fertility decisions of individuals and publicly provided pensions in a small open economy with preferences for both child quantity and child quality. It is shown that if the preference for the quality of children is higher than the preference for the quantity of children, as casual observations seem to reveal in developed countries, then child subsidies always reduce the fertility rate. This way, the article provides an explanation for possible failures of pro-natalist policies based on child subsidisation implemented in many western countries, which may therefore result as fertility disincentives instead of fertility incentives
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