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Privatizing Social Security

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Author Info

  • Thomas Cooley

    (Simon School of Business, University of Rochester)

  • Jorge Soares

    (Department of Economics, George Washington University)

Abstract

This paper studies the political sustainability of the existing pay-as-you-go social security system in the face of recent demographic patterns. We analyze different approaches to privatizing the system and consider what it would require for them to be politically implementable. The analysis is based on an overlapping generations economy where an initial generation would choose to implement a pay-as-you-go social insurance system. We study the sustainability of this system in each subsequent period. We describe some transitions policies that make the current generations of agents at least as well off as the maintenance of the social security system. All feasible transition policies use debt to finance the benefits during the transition period shifting at least some of the cost to unborn generations. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1999.0069
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 2 (1999)
Issue (Month): 3 (July)
Pages: 731-755

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Handle: RePEc:red:issued:v:2:y:1999:i:3:p:731-755

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Related research

Keywords: Social Security; privatization; political implementability; overlapping generations; general equilibrium;

References

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  1. Thomas Tallarini, . "Risk-Sensitive Real Business Cycles," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 1997-35, Carnegie Mellon University, Tepper School of Business.
  2. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(1), pages 135-160, February.
  3. Lars Peter Hansen & Thomas J. Sargent, 1990. "Recursive Linear Models of Dynamic Economies," NBER Working Papers 3479, National Bureau of Economic Research, Inc.
  4. David Altig & Jagadeesh Gokhale, 1997. "Social Security privatization: a simple proposal," Working Paper, Federal Reserve Bank of Cleveland 9703, Federal Reserve Bank of Cleveland.
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