This paper considers the economic implications of the stalling birth rates and demographic development in Europe. To remedy for this it proposes a child pension system. This system allows additional pension facilities depending on the number of children raised. It should be a PAYG pension financed with an income tax. The main motivation for this is that parents have invested resources which also benefit society.
Keywords pension system - birth rate - human capital - demography
18th Tinbergen Lecture, Amsterdam, October 22, 2004
Ifo Institute for Economic Research at the University of Munich.
I am grateful to Lans Bovenberg and Peter Cornelisse for useful conversations about the Dutch pension system and Tinbergen
s views on children and pensions. I thank Robert Koll, Regina von Hehl and Elsita Walter for careful research assistance, and Tobias Seidel, Michael Stimmelmayr, Martin Werding and Markus Zimmer for useful comments.