Social security, the family, and economic growth

We show that a defined-benefits PAYG social security system distorts key family-based choices that affect economic growth. We identify human capital as the engine of growth, and the motivating forces linking the family's overlapping generations as mutually productive intergenerational transfers and/or altruism. The PAYG system is shown to affect adversely at least one of three determinants of the economy's growth path: fertility, savings, and investment in human capital. The specific effects may vary over different stages of economic development. The growth rate is expected to fall in advanced economies. Our analysis indicates that the effect may be sizeable.