Academic journal article European Research Studies

Pension System as a Demographic Recession Factor

Academic journal article European Research Studies

Pension System as a Demographic Recession Factor

Article excerpt

Introduction

The article looks into the distribution pension system impact on birth rate. It is surprising that pension system analysis seldom considers the way the system influences on people's action. Usually it is analyzed if this or that kind of pension system can provide the necessary income level of the pensioners, and how financially sustainable this or that system is. The Austrian economic school methodology application allows analyzing the system impact on people's actions as well as social relation evolution and public morals using the economic science.

Literature review

A number of scientists have already voiced the hypothesis that pension system influences on the birth rate decrease. For example, in 1976 the demographer Borisov (1976) pointed out that birth rate is economically motivated, and "social insurance system development is decreasing the dependence of the ill and elderly people on a number of children or on their availability. The children, being a kind of insurance, are becoming unnecessary in the old age". Despite the importance of this idea for economics it has not been massively supported by scientists-economists. This fact causes regret, but not surprise, taking into account that a big part of the economists is employed by educational establishments controlled by state. Consequently most of their activity is scientific conclusions to ground the ideas beneficial for the state and the officials. The officials are unlikely to like the conclusion that negative trends in the society resulted from their activity.

Akparov (2012) and Geleransky (2013 and 2015) are to be singled out among the Russian researchers studying the interconnection of the pension system and birth rate. They consider it is necessary to establish a rigid connection between a number of children and their income and pensions of those who raised them. This measure is grounded by the logical analysis, i.e. a priori method. The mentioned above hypothesis was also logically analyzed by the author of this article (Vlasov, 2012; Galooyek et al., 2014; Kossova et al., 2014; Vovchenko et al., 2017; Guskova et al., 2016; Cristea and Thalassinos, 2016; Tcvetkov et al., 2015). Besides it is necessary to mention Goncharova's research (2012) published in the Internet in 2012, where the impact of the pension system on the birth rate reduction on the basis of the statistical data is grounded.

Research Methods

To analyze this hypothesis the following methods are used. Apriorism, logic method: all conclusions logically follow from the certain assumptions about human activity that do not require verification. Methodological individualism: according this principle all results of human activity are to be explained or understood in terms of the individual's actions. Any social phenomenon is a result of conscious choice of a number of people. This method is also connected with the induction method and apriorism because it means logical transition from private to general. Subjectivism: This method means that it is necessary to analyze human activity or institutions on the basis of that subjective significance that an analyzed individual applies to this action. This principle suggests that those goals and means the individual chooses are subjective, but it is a rational choice, because a person chooses the most suitable from his/her point of view means to achieve its subjective goals. Consideration of economic processes in the real time means, that consequences of any taken decisions and people's actions are not manifested instantly but in the course of time. On the other hand, people are able to analyze the results of the past actions and correct their future actions. It results in rational models of behavior due to the fact that resources are limited in relation to people's endless needs, but people are able to learn from their own mistakes.

Consideration of processes in the real time also suggests that imposed social institutions such as pension system in the course of time distorts the individuals' rational choice, who due to the pressure of rationality cannot take into account those incentives the introduced system gives them. …

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