Advanced Search
MyIDEAS: Login to save this paper or follow this series

Social Security and Risk Sharing

Contents:

Author Info

  • Piero Gottardi
  • Felix Kubler

Abstract

In this paper we identify conditions under which the introduction of a pay-as-you-go social security system is ex-ante Pareto-improving in a stochastic overlapping generations economy with capital accumulation and land. We argue that these conditions are consistent with many calibrations of the model used in the literature. In our model financial markets are complete and competitive equilibria are interim Pareto efficient. Therefore, a welfare improvement can only be obtained if agents’ welfare is evaluated ex ante, and arises from the possibility of inducing, through social security, an improved level of intergenerational risk sharing. We will also examine the optimal size of a given social security system as well as its optimal reform. The analysis will be carried out in a relatively simple set-up, where the various effects of social security, on the prices of long-lived assets and the stock of capital, and hence on output, wages and risky rates of returns, can be clearly identified.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-04/cesifo1_wp1705.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1705.

as in new window
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:ces:ceswps:_1705

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: intergenerational risk sharing; social security; ex ante welfare improvements; interim optimality; price effects;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Laurence Ball & N Gregory Mankiw, 2001. "Intergenerational Risk Sharing in the Spirit of Arrow Debreu and Rawls with Applications to Social Security Design," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 478, The Johns Hopkins University,Department of Economics.
  2. Peter Diamond & John Geanakoplos, 2003. "Social Security Investment in Equities," American Economic Review, American Economic Association, American Economic Association, vol. 93(4), pages 1047-1074, September.
  3. Martin Feldstein & Jeffrey B. Liebman, 2001. "Social Security," NBER Working Papers 8451, National Bureau of Economic Research, Inc.
  4. Robert J. Shiller, 1998. "Social Security and Institutions for Intergenerational, Intragenerational and International Risk Sharing," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1185, Cowles Foundation for Research in Economics, Yale University.
  5. Olovsson, Conny, 2010. "Quantifying the risk-sharing welfare gains of social security," Journal of Monetary Economics, Elsevier, Elsevier, vol. 57(3), pages 364-375, April.
  6. De Menil, Georges & Murtin, Fabrice & Sheshinski, Eytan, 2006. "Planning for the optimal mix of paygo tax and funded savings," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 5(01), pages 1-25, March.
  7. Piero Gottardi & Subir Chattopadhyay, 1999. "- Stochastic Olg Models, Market Structure And Optimality," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1999-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  8. Constantinides, G.M. & Donalson, J.B. & Mehra, R., 1997. "Junior Can't Borrow: A New Perspective on the Equity Premium Puzzle," Papers, Columbia - Graduate School of Business 97-24, Columbia - Graduate School of Business.
  9. Roger H. Gordon & Hal R. Varian, 1985. "Intergenerational Risk Sharing," NBER Working Papers 1730, National Bureau of Economic Research, Inc.
  10. Henning Bohn, 2004. "Intergenerational Risk Sharing and Fiscal Policy," 2004 Meeting Papers, Society for Economic Dynamics 22, Society for Economic Dynamics.
  11. Enders, Walter & Lapan, Harvey E., 1982. "Social Security Taxation and Inter-Generational Risk Sharing," Staff General Research Papers, Iowa State University, Department of Economics 10822, Iowa State University, Department of Economics.
  12. 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.
  13. Wang Yong, 1993. "Stationary Equilibria in an Overlapping Generations Economy with Stochastic Production," Journal of Economic Theory, Elsevier, Elsevier, vol. 61(2), pages 423-435, December.
  14. Krueger, Dirk & Kubler, Felix, 2004. "Computing equilibrium in OLG models with stochastic production," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 28(7), pages 1411-1436, April.
  15. Demange, Gabrielle & Laroque, Guy, 2000. " Social Security, Optimality, and Equilibria in a Stochastic Overlapping Generations Economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(1), pages 1-23.
  16. Olovsson, Conny, 2004. "The Welfare Gains of Improving Risk Sharing in Social Security," Seminar Papers, Stockholm University, Institute for International Economic Studies 728, Stockholm University, Institute for International Economic Studies.
  17. Kent A. Smetters, 2004. "Trading with the Unborn: A New Perspective on Capital Income Taxation," Working Papers, University of Michigan, Michigan Retirement Research Center wp066, University of Michigan, Michigan Retirement Research Center.
  18. Rao Aiyagari, S. & Peled, Dan, 1991. "Dominant root characterization of Pareto optimality and the existence of optimal equilibria in stochastic overlapping generations models," Journal of Economic Theory, Elsevier, Elsevier, vol. 54(1), pages 69-83, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1705. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.