Growth, PAYG pension systems crisis and mandatory age of retirement

Since in many countries - plagued by low fertility - significant increases of the mandatory retirement age have been recently introduced with the declared objective to sustain PAYG pension budgets, then in this paper we investigate whether and how such boosts are effective. It is shown - in the basic two-period overlapping generations model of endogenous growth, which is maybe the toy-model most used for pension policy analyses - that the postponement of the retirement age may be harmful for growth and, more interestingly, for pension payments. Therefore this result suggests that the positive effects of lengthening mandatory retirement ages for sustaining PAYG pension budgets might not be warranted.