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Is Social Security Really Bad for Growth?

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  • Giorgio Bellettini

    (University of Bologna)

  • Carlotta Berti Ceroni

    (University of Bologna and Universitat Pompeu Fabra)

Abstract

This paper develops a model of endogenous growth with overlapping generations to investigate the joint determination of social security, public investment and growth in a small open economy. We show that a pure pay-as-you-go-system with indexed to wages benefits provides the taxpayers with the incentives to support growth-oriented policies, which increase the future productivity of labor. We find that outcomes characterized by positive levels of intergenerational redistribution, public investment and long run growth can be sustained as subgame-perfect Nash equilibria of an infinitely repeated intergenerational game, if and only if the marginal productivity of public capital is large enough. Furthermore, we show that transfers comove with public investment and growth. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1998.0050
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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): 4 (October)
Pages: 796-819

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Handle: RePEc:red:issued:v:2:y:1999:i:4:p:796-819

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References

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  1. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
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  10. Persson, Torsten & Tabellini, Guido, 1991. "Is Inequality Harmful for Growth? Theory and Evidence," Department of Economics, Working Paper Series qt00x7n68q, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  20. Per Krusell & José-Victor Ríos-Rull, 1994. "What Constitutions Promote Capital Accumulation? A Political-Economy Approach," Wallis Working Papers WP1, University of Rochester - Wallis Institute of Political Economy.
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  26. G. Bellettini & C. Berti Ceroni, 1997. "Social Security and Growth: New Empirical Evidence," Working Papers 269, Dipartimento Scienze Economiche, Universita' di Bologna.
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