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Is Social Security Really Bad for Growth?

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Author Info

  • 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. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  2. Torsten Persson and Guido Tabellini., 1991. "Is Inequality Harmful for Growth? Theory and Evidence," Economics Working Papers 91-155, University of California at Berkeley.
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  7. Xavier Sala-i-Martin, 1995. "A positive theory of social security," Economics Working Papers 108, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
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  10. Cukierman, Alex & Meltzer, Allan H, 1989. "A Political Theory of Government Debt and Deficits in a Neo-Ricardian Framework," American Economic Review, American Economic Association, vol. 79(4), pages 713-32, September.
  11. Samuelson, Paul A, 1975. "Optimum Social Security in a Life-Cycle Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 539-44, October.
  12. Michele Boldrin, 2005. "Public Education and Capital Accumulation," Levine's Bibliography 172782000000000090, UCLA Department of Economics.
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  17. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  18. repec:fth:coluec:595 is not listed on IDEAS
  19. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  20. Robert J. Barro, 1991. "A Cross-Country Study of Growth, Saving, and Government," NBER Chapters, in: National Saving and Economic Performance, pages 271-304 National Bureau of Economic Research, Inc.
  21. G. Bellettini & C. Berti Ceroni, 1997. "Social Security and Growth: New Empirical Evidence," Working Papers 269, Dipartimento Scienze Economiche, Universita' di Bologna.
  22. David A. Aschauer, 1989. "Public investment and productivity growth in the Group of Seven," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 17-25.
  23. 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.
  24. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February.
  25. BOLDRIN, Michele & RUSTICHINI, Aldo, 1994. "Equilibria with Social Security," CORE Discussion Papers 1994060, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  26. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
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