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


Publication Date


JEL Code(s)


Programme Area(s)


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.