Pensions with heterogenous individuals and endogenous fertility

This paper studies the design of pension schemes in a society where fertility is endogenous
and parents differ in their ability to raise children. In a world with perfect
information, a pay-as-you-go social security system is characterized by equal pensions
for all but different contributions which may or may not increase with the number of
children. Additionally, fertility must be subsidized at the margin to correct for the
externality that accompanies fertility. In a world of asymmetric information, incentiverelated
distortions supplement the Pigouvian subsidy. These may either require an
additional subsidy or an offsetting tax on fertility depending on whether the redistribution
is towards people with more or less children. In the former case, pensions are
decreasing in the number of children; in the latter case, they are increasing.