Advanced Search
MyIDEAS: Login

Fostering Within-Family Human-Capital Investment: An Intragenerational Insurance Perspective of Social Security

Contents:

Author Info

  • Martin Barbie
  • Marcus Hagedorn
  • Ashok Kaul

Abstract

We propose an extended pay-as-you-go social security system that conditions pension benefits on the aggregate wage sum and on the wage of one's children. The latter increases parents' incentives to provide their children with good within-family education. However, since wages depend stochastically on parents' unobservable investment in their children's human capital, some insurance against the productivity risk of one's children is provided, because retirement income still depends on aggregate wages. We analyze the effects of such a social security system on the endogenous distribution of human capital and compare it with real-world systems, which typically do not condition benefits on the wages of one's children. Our approach suggests a novel role for a well-designed social security system: it can foster human-capital accumulation and act as an intragenerational insurance against productivity risk.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ingentaconnect.com/content/mohr/fa/2006/00000062/00000004/art00003
Download Restriction: Fulltext access is included for subscribers to the printed version.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 62 (2006)
Issue (Month): 4 (December)
Pages: 503-529

as in new window
Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200612)62:4_503:fwhiai_2.0.tx_2-_

Contact details of provider:
Web page: http://www.mohr.de/fa

Order Information:
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Email:

Related research

Keywords: human-capital formation; social security; intragenerational insurance; heterogeneous households;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Andrew B. Abel, 2001. "The Social Security Trust Fund, the Riskless Interest Rate, and Capital Accumulation," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 153-202 National Bureau of Economic Research, Inc.
  2. Bohn, Henning, 1998. "Risk Sharing in a Stochastic Overlapping Generations Economy," University of California at Santa Barbara, Economics Working Paper Series qt9r2809f0, Department of Economics, UC Santa Barbara.
  3. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Tranfers to families with children as a principal-agent problem," CHILD Working Papers wp02_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  4. Smith, Alasdair, 1982. "Intergenerational transfers as social insurance," Journal of Public Economics, Elsevier, vol. 19(1), pages 97-106, October.
  5. Martin Feldstein & Jeffrey B. Liebman, 2001. "Social Security," NBER Working Papers 8451, National Bureau of Economic Research, Inc.
    • Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
  6. James J. Heckman, 1999. "Policies to Foster Human Capital," NBER Working Papers 7288, National Bureau of Economic Research, Inc.
  7. Robert C. Merton, 1981. "On the Role of Social Security as a Means for Efficient Risk-Bearing in an Economy Where Human Capital Is Not Tradeable," NBER Working Papers 0743, National Bureau of Economic Research, Inc.
  8. Schweizer, Urs, 1996. "Endogenous fertility and the Henry George Theorem," Journal of Public Economics, Elsevier, vol. 61(2), pages 209-228, August.
  9. Martin Kolmar, 1997. "Intergenerational redistribution in a small open economy with endogenous fertility," Journal of Population Economics, Springer, vol. 10(3), pages 335-356.
  10. Robert C. Merton, 1983. "On the Role of Social Security as a Means for Efficient Risk Sharing in an Economy Where Human Capital Is Not Tradable," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 325-358 National Bureau of Economic Research, Inc.
  11. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
  12. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July.
  13. Henning Bohn, 1999. "Social Security and Demographic Uncertainty: The Risk Sharing Properties of Alternative Policies," NBER Working Papers 7030, National Bureau of Economic Research, Inc.
  14. Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
  15. Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249, December.
  16. repec:fth:calaec:3-98 is not listed on IDEAS
  17. Enders, Walter & Lapan, Harvey E., 1982. "Social Security Taxation and Inter-Generational Risk Sharing," Staff General Research Papers 10822, Iowa State University, Department of Economics.
  18. repec:fth:calaec:03-98 is not listed on IDEAS
  19. Mookherjee, Dilip, 1984. "Optimal Incentive Schemes with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 433-46, July.
  20. Bengt Holmstrom, 1997. "Moral Hazard and Observability," Levine's Working Paper Archive 1205, David K. Levine.
  21. Roger H. Gordon & Hal R. Varian, 1985. "Intergenerational Risk Sharing," NBER Working Papers 1730, National Bureau of Economic Research, Inc.
  22. Gabrielle Demange & Guy Laroque, 1999. "Social Security and Demographic Shocks," Econometrica, Econometric Society, vol. 67(3), pages 527-542, May.
  23. Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Meier, Volker & Wrede, Matthias, 2010. "Pensions, fertility, and education," Munich Reprints in Economics 19214, University of Munich, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mhr:finarc:urn:sici:0015-2218(200612)62:4_503:fwhiai_2.0.tx_2-_. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.