This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Social Security with Rational and Hyperbolic Consumers

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Hans Fehr
Christian Habermann
Fabian Kindermann

Additional information is available for the following registered author(s):

Abstract

The present paper studies the role of social security in an economy populated by overlapping generations of individuals that have time-consistent or time-inconsistent preferences, face mortality and individual income risk, borrowing constraints as well as progressive income taxes. Our simulations start from an artificial equilibrium where social security is completely neutral. Next we introduce successively alternative deviations from neutrality in order to isolate the various economic effects of social security. The latter are mainly the insurance provision against mortality and income risk, the negative liquidity effects for young households and the provision of a commitment technology for present-biased hyperbolic consumers. Our simulations indicate that the positive effects of social security dominate the negative ones for a wide range of parameter combinations. For our central parametrization social security induces an overall welfare gain which amounts to roughly 1.5 percent of aggregate resources in the hyperbolic model and a welfare loss of about 0.5 percent of resources in the model with rational consumers.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.bgpe.de/texte/DP/010_habermann1.pdf
File Format: application/pdf
File Function: First version, 2006
Download Restriction: no

Publisher Info
Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 010.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 34 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:bav:wpaper:010_kindermann1

Contact details of provider:
Web page: http://www.bgpe.de/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Steffen Mueller).

Related research
Keywords: social security; stochastic general equilibrium; hyperbolic consumers;

Other versions of this item:

Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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. Hubbard, R Glenn & Judd, Kenneth L, 1987. "Social Security and Individual Welfare: Precautionary Saving, Borrowing Constraints, and the Payroll Tax," American Economic Review, American Economic Association, vol. 77(4), pages 630-46, September. [Downloadable!] (restricted)
  2. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November. [Downloadable!] (restricted)
  3. Jay Hong & Jose-Victor Rios-Rull, 2006. "Social Security, Life Insurance and Annuities for Families," 2006 Meeting Papers 410, Society for Economic Dynamics. [Downloadable!]
    Other versions:
  4. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October. [Downloadable!] (restricted)
  5. Dirk Krueger & Felix Kubler, 2006. "Pareto-Improving Social Security Reform when Financial Markets are Incomplete!?," American Economic Review, American Economic Association, vol. 96(3), pages 737-755, June. [Downloadable!]
    Other versions:
  6. Juan C. Conesa & Carlos Garriga, 2008. "Optimal Fiscal Policy In The Design Of Social Security Reforms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 291-318, 02. [Downloadable!] (restricted)
    Other versions:
  7. Shinichi Nishiyama & Kent Smetters, 2007. "Does Social Security Privatization Produce Efficiency Gains?," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1677-1719, November. [Downloadable!] (restricted)
    Other versions:
  8. Ted O'Donoghue & Matthew Rabin, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March. [Downloadable!] (restricted)
  9. Storesletten, Kjetil & Telmer, Chris I. & Yaron, Amir, 1999. "The risk-sharing implications of alternative social security arrangements," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 213-259, June. [Downloadable!] (restricted)
    Other versions:
  10. Shinichi Nishiyama & Kent Smetters, 2005. "Consumption Taxes and Economic Efficiency with Idiosyncratic Wage Shocks," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1088-1115, October.
  11. Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 1999. "Social Security in an Overlapping Generations Economy with Land," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 638-665, July. [Downloadable!] (restricted)
    Other versions:
  12. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2007. "Elimination of Social Security in a Dynastic Framework," Review of Economic Studies, Blackwell Publishing, vol. 74(1), pages 113-145, 01. [Downloadable!] (restricted)
    Other versions:
  13. Robert Fenge & Silke Uebelmesser & Martin Werding, 2006. "On the Optimal Timing of Implicit Social Security Taxes Over the Life Cycle," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(1), pages 68-107, March. [Downloadable!] (restricted)
  14. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, September.
  15. Mariacristina De Nardi & Selahattin Imrohoroglu & Thomas J. Sargent, 1999. "Projected U.S. Demographics and Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 575-615, July. [Downloadable!] (restricted)
    Other versions:
  16. Stephen G. Cecchetti & Pok-sang Lam & Nelson C. Mark, 2000. "Asset Pricing with Distorted Beliefs: Are Equity Returns Too Good to Be True?," American Economic Review, American Economic Association, vol. 90(4), pages 787-805, September. [Downloadable!] (restricted)
    Other versions:
  17. Juan A. Rojas & Carlos Urrutia, 2004. "Social Security Reform with Uninsurable Income Risk and Endogenous Borrowing Constraints," Working Papers 0409, Centro de Investigacion Economica, ITAM. [Downloadable!]
    Other versions:
  18. George-Marios Angeletos et al., 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer. [Downloadable!] (restricted)
  19. Laurence J. Kotlikoff, 1998. "Simulating the Privatization of Social Security in General Equilibrium," NBER Chapters, in: Privatizing Social Security, pages 265-311 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  20. Fehr, Hans, 2000. " Pension Reform during the Demographic Transition," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(3), pages 419-43, June. [Downloadable!] (restricted)
  21. HUANG, HE & IMROHOROG[caron]LU, SELAHATTIN & SARGENT, THOMAS J., 1997. "Two Computations To Fund Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 1(01), pages 7-44, January. [Downloadable!]
  22. Christian Habermann & Fabian Kindermann, 2007. "Multidimensional Spline Interpolation: Theory and Applications," Computational Economics, Springer, vol. 30(2), pages 153-169, September. [Downloadable!] (restricted)
  23. Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 2000. "Time inconsistent preferences and Social Security," Discussion Paper / Institute for Empirical Macroeconomics 136, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  24. Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1995. "A Life Cycle Analysis of Social Security," Economic Theory, Springer, vol. 6(1), pages 83-114, June.
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. Cagri Seda Kumru & Chung Tran, 2009. "Temptation and Social Security in a Dynastic Framework," Discussion Papers 2009-09, School of Economics, The University of New South Wales. [Downloadable!]
  2. Jesus Marin-Solano & Concepcio Patxot, 2009. "Discounting Arduousness," Working Papers in Economics 230, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
Statistics
Access and download statistics

Did you know? A tutorial is available.

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.