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Volume 56, Issue 11 -12

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The Demographic Challenge of the Interconnected Education and Pension System in the Czech Republic

Slobodyan, Sergey; Vinogradov, Viatcheslav

Year: 2006   Volume: 56   Issue: 11 -12   Pages: 490-505

Abstract: In their recent paper, Boldrin and Montes (2005) analyzed the “return on human capital investment” theory and showed that if borrowing for education is not possible, then a combined public education and pension system that uses lump-sum revenue from taxes and income transfers can replicate the first-best decentralized allocation achieved in an economy without taxes, where borrowing for human-capital accumulation (education) is permitted. Taking into account that such borrowing is either absent or inefficient in many countries, a combined public education/public pension scheme might prove to be welfare enhancing. Guided by this theoretical framework, the authors calibrate the parameters of an interconnected pension and education system for the Czech Republic under different demographic scenarios and fiscal rules. They also model the impact of increases in the retirement age and of a hypothetical unbalancing of pensions or educational transfers.

JEL classification: H52, H55, I22, I28, J11, J26

Keywords: public education; demographic development; pay-as-you-go pensions

RePEc: http://ideas.repec.org/a/fau/fauart/v56y2006i11-12p490-505.html

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