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Quantifying the risk-sharing welfare gains of social security

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Author Info

  • Olovsson, Conny

Abstract

The welfare effects of intergenerational risk sharing through a pay-as-you-go social security system that is efficiently indexed to wages or interest rates are quantified. Comparing steady states, there are large welfare gains of being born into an economy with efficient risk sharing as compared to the current U.S. system. Efficient policy involves an increasingly risky net of tax income over the life cycle. When adjustment to steady state is taken into account, the welfare gains largely turn negative. The results are also compared and contrasted to the first best allocation.

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File URL: http://www.sciencedirect.com/science/article/B6VBW-4YJ4NJ2-2/2/36e477c86b604c0c613ab5b66a306055
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 57 (2010)
Issue (Month): 3 (April)
Pages: 364-375

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Handle: RePEc:eee:moneco:v:57:y:2010:i:3:p:364-375

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Web page: http://www.elsevier.com/locate/inca/505566

Related research

Keywords: Social security Intergenerational risk sharing;

References

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  1. Dirk Krueger & Felix Kubler, 2006. "Pareto-Improving Social Security Reform when Financial Markets are Incomplete!?," American Economic Review, American Economic Association, vol. 96(3), pages 737-755, June.
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  14. Storesletten, Kjetil & Telmer, Chris I. & Yaron, Amir, 1999. "The risk-sharing implications of alternative social security arrangements," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 213-259, June.
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Citations

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Cited by:
  1. Roel Beetsma & Ward Romp, 2013. "Participation Constraints in Pension Systems," Tinbergen Institute Discussion Papers 13-149/VI, Tinbergen Institute.
  2. Michael Hatcher, 2013. "The inflation risk premium on government debt in an overlapping generations model," Working Papers 2013_17, Business School - Economics, University of Glasgow.
  3. Piero Gottardi & Felix Kubler, 2009. "Social Security and Risk Sharing," Economics Working Papers ECO2009/12, European University Institute.
  4. Yvonne Adema & Jan Bonenkamp & Lex Meijdam, 2011. "Retirement Flexibility and Portfolio Choice in General Equilibrium," Tinbergen Institute Discussion Papers 11-038/2/DSF13, Tinbergen Institute.
  5. Jan Bonenkamp & Yvonne Adema & Lex Meijdam, 2011. "Retirement Flexibility and Portfolio Choice," CPB Discussion Paper 182, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Echevarría, Cruz A., 2012. "Income tax progressivity, physical capital, aggregate uncertainty and long-run growth in an OLG economy," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 955-974.
  7. Michael, Hatcher, 2013. "Aggregate and welfare effects of long run inflation risk under inflation and price-level targeting," SIRE Discussion Papers 2013-19, Scottish Institute for Research in Economics (SIRE).
  8. 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.
  9. Conny Olovsson, 2014. "How Does a Pay-as-you-go System Affect Asset Returns and the Equity Premium?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(1), pages 131-149, January.
  10. Niklas Potrafke, 2007. "Social Security in Germany: A Prey of Political Opportunism?," Discussion Papers of DIW Berlin 677, DIW Berlin, German Institute for Economic Research.
  11. Echevarría Olave, Cruz Angel & Iza Padilla, María Amaya, . "Income Taxation and Growth in an OLG Economy: Does Aggregate Uncertainty Play any Role?," DFAEII Working Papers DFAEII;2013-06, University of the Basque Country - Department of Foundations of Economic Analysis II.

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