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Social Security Taxation and Intergenerational Risk Sharing

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  • Enders, Walter
  • Lapan, Harvey E

Abstract

The life cycle hypothesis has become the dominant mode used to analyze the effects of a social security system on private saving, the labor/leisure choice, and social welfare. As both Barro and Samuelson indicate, a fully funded Social Security program (in a world of certainty) would drive out an equivalent amount of private saving. If the interest rate is r, the effects of a payment of a dollar into the social security pool while young would just offset* the effects of receiving (1+r) dollars as a transfer when retired. Papers by Diamond, Hi», and Samuelson, among others, have examined the effects of non-fully funded Social Security schemes in a growing economy. A non-fully funded program can be used to alter the private sector's saving rate and, hence, the capital/labor ratio. Social Security, then, can be used as a policy tool for achieving the (or some variant of the) golden rule growth path.
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Suggested Citation

  • Enders, Walter & Lapan, Harvey E, 1982. "Social Security Taxation and Intergenerational Risk Sharing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 647-658, October.
    • Handle: RePEc:ier:iecrev:v:23:y:1982:i:3:p:647-58
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