DP1734 The Value of Children and Immigrants in a Pay-As-You-Go Pension System: A Proposal For a Partial Transition to a Funded System

Author(s): Hans-Werner Sinn
Publication Date: November 1997
Keyword(s): Children, Immigration, Pay-As-You-Go, Pension Systems
JEL(s): H55, J6
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1734

It is shown that the net fiscal externality created by an additional member of a pay-as-you-go-pension system that is endowed with individual accounts equals the gross contributions of this member. In Germany, this equals about 175,000 Deutsche marks. The paper uses this information to design a hybrid funded system that avoids this externality and improves the public pension system under equity and efficiency considerations.