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Social Security, Optimality, and Equilibria in a Stochastic Overlapping Generations Economy

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  • Demange, Gabrielle
  • Laroque, Guy

Abstract

Social security institutions implement intergenerational transfers and distribute risks over time. To compare various social security designs, we study an overlapping generations model with demographic shocks. Production takes place through a neoclassical production function subject to productivity shocks. We give a near characterization of optimal allocations. We study rational expectations equilibria when contributions are mandatory, based on labor and capital income. We also describe the equilibria of an economy with a voluntary pay-as-you-go social security fund, and show that they have a long-run optimality property. An example with Cobb-Douglas production and utility functions illustrates the results. Copyright 2000 by Blackwell Publishing Inc.

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 2 (2000)
Issue (Month): 1 ()
Pages: 1-23

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Handle: RePEc:bla:jpbect:v:2:y:2000:i:1:p:1-23

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Citations

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Cited by:
  1. Andreas Wagener, 2001. "On Intergenerational Risk Sharing within Social Security Schemes," CESifo Working Paper Series 499, CESifo Group Munich.
  2. Felix Kubler & Department of Economics & Department of Economics & Piero Gottardi, 2007. "Social Security and RIsk Sharing," 2007 Meeting Papers, Society for Economic Dynamics 625, Society for Economic Dynamics.
  3. Martin Barbie & Marcus Hagedorn & Ashok Kaul, 2000. "mic Efficiency and Pareto Optimality in a Stochastic OLG Model with Production and Social Security," Bonn Econ Discussion Papers, University of Bonn, Germany bgse8_2000, University of Bonn, Germany, revised Jun 2000.
  4. Gaetano Bloise & Pietro Reichlin, 2008. "Asset prices, debt constraints and inefficiency," Departmental Working Papers of Economics - University 'Roma Tre' 0089, Department of Economics - University Roma Tre.
  5. Hillebrand, Marten, 2012. "On the optimal size of Social Security in the presence of a stock market," Journal of Mathematical Economics, Elsevier, vol. 48(1), pages 26-38.
  6. Gabay, Daniel & Grasselli, Martino, 2012. "Fair demographic risk sharing in defined contribution pension systems," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(4), pages 657-669.
  7. Chattopadhyay, Subir, 2001. "The unit root property and optimality: a simple proof," Journal of Mathematical Economics, Elsevier, vol. 36(2), pages 151-159, November.
  8. Barbie, Martin & Hagedorn, Marcus & Kaul, Ashok, 2007. "On the interaction between risk sharing and capital accumulation in a stochastic OLG model with production," Journal of Economic Theory, Elsevier, Elsevier, vol. 137(1), pages 568-579, November.
  9. Antoine D'Autume, 2003. "L'impact du vieillissement démographique sur les mécanismes macroéconomiques," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00452552, HAL.
  10. Barbie, Martin & Hagedorn, Marcus & Kaul, Ashok, 2000. "Dynamic Efficiency and Pareto Optimality in a Stochastic OLG Model with Production and Social Security," IZA Discussion Papers 209, Institute for the Study of Labor (IZA).
  11. Ohtaki, Eisei, 2013. "Golden rule optimality in stochastic OLG economies," Mathematical Social Sciences, Elsevier, Elsevier, vol. 65(1), pages 60-66.
  12. Hillebrand, Marten, 2011. "On the role of labor supply for the optimal size of Social Security," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 35(7), pages 1091-1105, July.
  13. Ohtaki, Eisei, 2014. "Tractable graphical device for analyzing stationary stochastic OLG economies," Journal of Macroeconomics, Elsevier, Elsevier, vol. 40(C), pages 16-26.

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