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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)

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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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Publisher 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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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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.:

  1. Michele Boldrin, 1993. "Public Education and Capital Accumulation," Working Papers 9301, Centro de Investigacion Economica, ITAM.
    Other versions:
  2. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March. [Downloadable!] (restricted)
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  3. 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. [Downloadable!] (restricted)
  4. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. 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. [Downloadable!] (restricted)
  6. 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. [Downloadable!]
  7. 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.
  8. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May. [Downloadable!] (restricted)
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  9. Robert J. Barro, 1989. "A Cross-Country Study of Growth, Saving, and Government," NBER Working Papers 2855, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
  11. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Boadway, Robin W & Wildasin, David E, 1989. "A Median Voter Model of Social Security," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 307-28, May. [Downloadable!] (restricted)
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  13. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
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  14. Guido Tabellini, 1990. "A Positive Theory of Social Security," NBER Working Papers 3272, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Jeffrey D. Sachs, 1989. "Social Conflict and Populist Policies in Latin America," NBER Working Papers 2897, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Torsten Persson & Guido Tabellini, 1991. "Is Inequality Harmful for Growth? Theory and Evidence," NBER Working Papers 3599, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. 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. [Downloadable!] (restricted)
  18. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September. [Downloadable!] (restricted)
  19. Kotlikoff, Laurence J & Persson, Torsten & Svensson, Lars E O, 1988. "Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem," American Economic Review, American Economic Association, vol. 78(4), pages 662-77, September. [Downloadable!] (restricted)
  20. repec:fth:coluec:595 is not listed on IDEAS
  21. Sala-i-Martin, Xavier X, 1996. " A Positive Theory of Social Security," Journal of Economic Growth, Springer, vol. 1(2), pages 2a77-304, June.
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  22. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  23. Deborah Roseveare & Willi Leibfritz & Douglas Fore & Eckhard Wurzel, 1996. "Ageing Populations, Pension Systems and Government Budgets: Simulations for 20 OECD Countries," OECD Economics Department Working Papers 168, OECD, Economics Department. [Downloadable!]
  24. G. Bellettini & C. Berti Ceroni, 1997. "Social Security and Growth: New Empirical Evidence," Working Papers 269, Dipartimento Scienze Economiche, Universita' di Bologna.
Full references

Cited by:
(explanations, 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.)

  1. Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Chien-Chiang Lee & Chun-Ping Chang, 2006. "Social security expenditure and GDP in OECD countries: A cointegrated panel analysis," International Economic Journal, Korean International Economic Association, vol. 20(3), pages 303-320, September. [Downloadable!] (restricted)
  3. Giovanni Prarolo & Francesco Lancia, 2007. "A Politico-Economic Model of Aging, Technology Adoption and Growth," Working Papers 2007.48, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  4. Martín Gonzales-Eiras & Dirk Niepelt, 2007. "Population Ageing, Government Budgets, and Productivity Growth in Politico-Economic Equilibrium," Working Papers 07.05, Swiss National Bank, Study Center Gerzensee. [Downloadable!]
    Other versions:
  5. Gugushvili, Alexi, 2007. "Giving the ageing of the population how can countries afford pay-as-you-go social insurance pensions?," MPRA Paper 2869, University Library of Munich, Germany. [Downloadable!]
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