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CESifo Economic Studies Advance Access published online on October 5, 2009
CESifo Economic Studies, doi:10.1093/cesifo/ifp024
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© The Author 2009. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

How to Avoid a Pension Crisis: A Question of Intelligent System Design*

Alessandro Cigno{dagger}

Conventional pension systems suffer from a design defect, which makes them financially unsustainable, and a source of inefficiency for the economy as a whole. The article outlines a second-best policy which includes a public pension system made up of two parallel schemes, a Bismarckian one allowing individuals to qualify for a pension by working and paying contributions in the usual way, and an unconventional one allowing them to qualify for a pension by having children, and investing time and money in their upbringing. (JEL codes: D13, D64, H55, J13, J14 and J26)

Key Words: Pension reform • implicit pension taxes and subsidies • child benefits • fertility • labour productivity


{dagger} University of Florence, CESifo, CHILD and IZA. Address: Università degli Studi di Firenze, Dipartimento di Studi sullo Stato, Via delle Pandette 21, 50127 Firenze, Italia. e-mail: cigno{at}unifi.it

*This article has benefitted from perceptive comments by two referees.


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