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Pay-As-You-Go Scheme and the Incentives to Self-educate or Educate Children

Toshiaki Kouno
Wed, 2009-10-14
We investigate the relationship between the pay-as-you-go (PAYG) pension scheme and the accumulation of human capital. We introduce the incentives of self-education into an overlapping generations model. The PAYG pension scheme encourages the incentives to educate children, but it discourages the incentives for their self-education. We show that the PAYG pension scheme hampers economic growth when the incentives for self-education are considered. The argument implies that while studying the relationship between the pension scheme, education, and economic growth, we must focus on determining the decision maker with regard to education.
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