Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-10T19:37:14.572Z Has data issue: false hasContentIssue false
  • English
  • Français

GROWTH, PENSIONS, AND THE AGING JONESES

Published online by Cambridge University Press:  05 January 2011

Walter H. Fisher  and
Ben J. Heijdra
Walter H. Fisher*
Affiliation:
Institute for Advanced Studies
Ben J. Heijdra
Affiliation:
University of Groningen Institute for Advanced Studies Netspar and CESifo
*
Address correspondence to: Walter H. Fisher, Institute for Advanced Studies, Department of Economics and Finance, Stumpergasse 56, A-1060 Vienna, Austria; e-mail: fisher@ihs.ac.at.
Get access Rights & Permissions [Opens in a new window]

Abstract

We incorporate keeping-up-with-the-Joneses (KUJ) preferences into the Blanchard–Yaari framework and develop a model of balanced growth. In this context we investigate status preference, demographic shocks, and pension policy. We find that a higher degree of KUJ lowers economic growth, whereas, in contrast, a decrease in the fertility and mortality rates increase it. In the second part of the paper we extend the model by incorporating a pay-as-you-go (PAYG) pension system with a statutory retirement date. The latter implies that the growth rate is higher under PAYG. We also consider the implications of pension reform under both defined benefit and defined contribution schemes.

Keywords

Relative ConsumptionOverlapping GenerationsEndogenous GrowthPension Reform
Type
Articles
Information
Macroeconomic Dynamics , Volume 16 , Issue 1 , February 2012 , pp. 35 - 60
Copyright
Copyright © Cambridge University Press 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Alvarez-Cuadrado, F., Monteiro, G., and Turnovsky, S.J. (2004) Habit formation, catching up with the Joneses, and economic growth. Journal of Economic Growth 9, 47–80.CrossRefGoogle Scholar
Barro, R.J. (1990) Government spending in a simple model of endogenous growth. Journal of Political Economy 98, S103–S125.Google Scholar
Bettendorf, L.J.H. and Heijdra, B.J. (2006) Population aging and pension reform in a small open economy with non-traded goods. Journal of Economic Dynamics and Control 30, 2389–2424.CrossRefGoogle Scholar
Blanchard, O.J. (1985) Debt, deficits, and finite horizons. Journal of Political Economy 91, 589–610.Google Scholar
Boucekkine, R., de la Croix, D., and Licandro, O. (2002) Vintage human capital, demographic trends, and endogenous growth. Journal of Economic Theory 104, 340–375.Google Scholar
Dupor, B. and Liu, W.F. (2003) Jealousy and equilibrium overconsumption. American Economic Review 93, 423–428.CrossRefGoogle Scholar
Feldstein, M.S. (1974) Social Security, induced retirement, and aggregate capital formation. Journal of Political Economy 82, 905–926.Google Scholar
Fisher, W.H. and Heijdra, B.J. (2009) Keeping up with the ageing Joneses. Journal of Economic Dynamics and Control 33, 53–64.Google Scholar
Heijdra, B.J. and Ligthart, J.E. (2006) The macroeconomic dynamics of demographic shocks. Macroeconomic Dynamics 10, 349–370.Google Scholar
Heijdra, B.J. and Romp, W.E. (2009) Retirement, pensions, and ageing. Journal of Public Economics 93, 586–604.Google Scholar
Liu, W.F. and Turnovsky, S.J. (2005) Consumption externalities, production externalities, and the accumulation of capital. Journal of Public Economics 89, 1097–1129.CrossRefGoogle Scholar
Rebelo, S. (1991) Long-run policy analysis and long-run growth. Journal of Political Economy 99, 500–521.CrossRefGoogle Scholar
Romer, P.M. (1986) Increasing returns and long-run growth. Journal of Political Economy 94, 1002–1037.CrossRefGoogle Scholar
Romer, P.M. (1989) Capital accumulation in the theory of long-run growth. In Barro, R.J. (ed.), Modern Business Cycle Theory, pp. 51–127. Oxford, UK: Basil Blackwell.Google Scholar
Saint-Paul, G. (1992) Fiscal policy in an endogenous growth model. Quarterly Journal of Economics 107, 1243–1259.CrossRefGoogle Scholar
Turnovsky, S.J. and Monteiro, G. (2007) Consumption externalities, production externalities, and efficient capital accumulation under time non-separable preferences. European Economic Review 51, 479–504.CrossRefGoogle Scholar
Wendner, R. (2008a) Externalities in a Model of Perpetual Youth with Age-Dependent Productivity. Paper 11335, Munich Personal RePEc Archive.CrossRefGoogle Scholar
Wendner, R. (2008b) Finite Horizon, Externalities, and Growth. Paper 8248, Munich Personal RePEc Archive.Google Scholar
Yaari, M.E. (1965) Uncertain lifetime, life insurance, and the theory of the consumer. Review of Economic Studies 32, 137–150.Google Scholar
Zhang, J., Zhang, J., and Lee, R. (2001) Mortality decline and long-run economic growth. Journal of Public Economics 80, 485–507.CrossRefGoogle Scholar