How are Notional Defined Contribution Pension Schemes and Fertility Correlated? Taking Sweden as an Example

How are notional defined contribution (NDC) pension schemes and fertility correlated? How is the return rate of NDC account determined? This study elucidates the dynamics of the correlations between NDC pension schemes and fertility by considering endogenous labor supply in an imperfect labor market using a two-period overlapping generations (OLG) model. Unemployment exists due to efficiency wages. The theoretical analysis reveals that the fertility and NDC pension account return rate are positively correlated; hence, increasing the return rate of the NDC account may improve people's fertility incentives. Second, the account return rate depends on not only the wage growth rate, but also the fertility level and the employment status. Third, the process of approaching steady states improves welfare. All the results are supported by simulations. This research provides the steady-state fertility rates and NDC account return rates corresponding to different interest rates by taking the Swedish economy as an example