This paper analyses a model of overlapping generations in which agents who do not participate in the labor market are unable to borrow. Thus an increase in a fully funded pension raises aggregate savings even with a fixed participation rate since private savings are not crowded out one-for-one. When labor force participation is determined endogenously, a rise in the level of fully funded pensions increases the aggregate labor supply. This in turn increases aggregate savings and growth, directly

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... by raising per capita savings and indirectly through tax and interest rate effects.