Effect of Social Security on Fertility and Savings: An Overlapping Generations Model

This paper studies the general equilibrium effects of various social security programs on the rates of population growth and capital accumulation within an overlapping generations framework with endogenous fertility and savings. It also shows that if the rate of intergenerational transfers of income from old to young or child care cost is low, a competitive equilibrium follows a path of over population and capital accumulation in a modified Pareto Optimal sense; a social security program in such a case is Pareto improving. A fully funded system is not neutral if it is financed by child - taxes. It also shows that unlike in the case of exogenous fertility where competitive equilibrium attains steady-state only asymptotically, when fertility is endogenous it may attain a unique globally stable steady state in finite time.