Social Security and Macroeconomic Risk in General Equilibrium
AbstractThis paper studies the interaction between macro-economic risk and paygo social security. For this, it uses an applied general equilibrium model with overlapping generations of risk-averse households. The sources of risk are productivity shocks and depreciation shocks. The risk profile of pensions differs from that of financial assets because pensions are linked partially to future wage rates and productivity. The model is used to discuss the effects of changes in the social security system on labor supply, private saving, and welfare in a closed economy.�The author finds that switching from Defined Benefit to Defined Contribution is generally welfare improving, if current generations are compensated, while a switch from a wage-indexed Defined Benefit system to a price-indexed system is generally welfare deteriorating. A reduction in the size of the pay-as-you-go system does not yield clear results: if current generations are compensated, some future generations lose, and others gain.
Download InfoIf 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.
Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 221.
Date of creation: Oct 2012
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-11-03 (Economics of Ageing)
- NEP-ALL-2012-11-03 (All new papers)
- NEP-DGE-2012-11-03 (Dynamic General Equilibrium)
- NEP-MAC-2012-11-03 (Macroeconomics)
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.:
- Henning Bohn, 1999.
"Online Appendix to Should the Social Security Trust Fund hold Equities? An Intergenerational Welfare Analysis,"
bohn99, Review of Economic Dynamics.
- Henning Bohn, 1999. "Should the Social Security Trust Fund Hold Equities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 666-697, July.
- Henning Bohn, 2001.
"Social Security and Demographic Uncertainty: The Risk-Sharing Properties of Alternative Policies,"
in: Risk Aspects of Investment-Based Social Security Reform, pages 203-246
National Bureau of Economic Research, Inc.
- Henning Bohn, 1999. "Social Security and Demographic Uncertainty: The Risk Sharing Properties of Alternative Policies," NBER Working Papers 7030, National Bureau of Economic Research, Inc.
- Robin Brooks, 2000. "What Will Happen To Financial Markets When The Baby Boomers Retire?," Computing in Economics and Finance 2000 92, Society for Computational Economics.
- Sanchez-Marcos, Virginia & Sanchez-Martin, Alfonso R., 2006.
"Can social security be welfare improving when there is demographic uncertainty?,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 30(9-10), pages 1615-1646.
- Virginia Sanchez-Marcos & Alfonso Sanchez Martin, 2004. "Can Social Security be welfare improving when there is demographic uncertainty?," Computing in Economics and Finance 2004 163, Society for Computational Economics.
- Lindbeck, Assar & Persson, Mats, 2002.
"The Gains from Pension Reform,"
Working Paper Series
580, Research Institute of Industrial Economics.
- Egil Matsen & Øystein Thøgersen, 2000.
"Designing Social Security – A Portfolio Choice Approach,"
Working Paper Series
1102, Department of Economics, Norwegian University of Science and Technology.
- Matsen, Egil & Thogersen, Oystein, 2004. "Designing social security - a portfolio choice approach," European Economic Review, Elsevier, vol. 48(4), pages 883-904, August.
- Matsen, E. & Thogersen, O., 2001. "Designing Social Security - A Portfolio Choice Approach," Papers 21/2001, Norwegian School of Economics and Business Administration-.
- Robin Brooks, 2000. "What Will Happen to Financial Markets When the Baby Boomers Retire?," IMF Working Papers 00/18, International Monetary Fund.
- Homburg, Stefan, 2014.
"The Efficiency of Unfunded Pension Schemes,"
Hannover Economic Papers (HEP)
dp-523, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
- Breyer, Friedrich & Straub, Martin, 1991.
"Welfare effects of unfunded pension systems when labor supply is endogenous,"
Discussion Papers, Series 1
252, University of Konstanz, Department of Economics.
- Breyer, Friedrich & Straub, Martin, 1993. "Welfare effects of unfunded pension systems when labor supply is endogenous," Journal of Public Economics, Elsevier, vol. 50(1), pages 77-91, January.
- repec:fth:calaec:4-98 is not listed on IDEAS
- Nick Draper & AndrÃ© Nibbelink & Johannes Uhde, 2013. "An Assessment of Alternatives for the Dutch First Pension Pillar, The Design of Pension Schemes," CPB Discussion Paper 259, CPB Netherlands Bureau for Economic Policy Analysis.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.