| Abstract: | Nishimura and Zhang (N-Z) extend the model of public pensions in Veall to allow for endogenous fertility. Their analysis rests upon the assumption that children are altruistic toward their parents and that pension entitlements are conditional upon the number of taxpayers that the beneficiary has managed to rear. The author criticizes these assumptions and demonstrates the implications of doing away with them. Introducing a social security system with a rate of tax equal to the socially optimal transfer from the young to the old will have no effect upon fertility, but will raise lifetime consumption and welfare. The implications of reversing the direction of altruism or doing away with altruism altogether are also discussed. The N-Z model is looked at in synthesis, followed by an alternative formulation. |
