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Unfunded Pensions and Endogenous Labor Supply

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  • Bhattacharya, Joydeep
  • Andersen, Torben M

Abstract

A classic result in dynamic public economics states that there is no welfare rationale for pay-as-you-go (PAYG) pensions in a dynamically-efficient neoclassical economy with exogenous labor supply. Parenthetically, a welfare justification for PAYG pensions exists if the economy is dynamically inefficient. Under a sufficient condition that the old be no less risk-averse than the young, these results extend to an economy with endogenous labor supply.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p14912-2012-02-10.pdf
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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 34912.

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Date of creation: 10 Feb 2012
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Publication status: Published in Macroeconomic Dynamics, June 2013, vol. 17 no. 5, pp. 971-997
Handle: RePEc:isu:genres:34912

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Related research

Keywords: social security; dynamic efficiency; pay-as-you-go; Diamond model; endogenous labor supply;

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References

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  1. Donald Meyer & Jack Meyer, 2005. "Relative Risk Aversion: What Do We Know?," Journal of Risk and Uncertainty, Springer, vol. 31(3), pages 243-262, December.
  2. Dirk Krueger, 2006. "Public Insurance against Idiosyncratic and Aggregate Risk: The Case of Social Security and Progressive Income Taxation," CESifo Economic Studies, CESifo, vol. 52(4), pages 587-620, December.
  3. Torben Andersen & Joydeep Bhattacharya, 2008. "On Myopia as Rationale for Social Security," CESifo Working Paper Series 2401, CESifo Group Munich.
  4. Selahattin Imrohoroglu & Aise Imrohoroglu, 2005. "Elimination of Social Security in a Dynastic Framework," 2005 Meeting Papers 928, Society for Economic Dynamics.
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  7. Lopez-Garcia, Miguel-Angel, 2008. "On the role of public debt in an OLG model with endogenous labor supply," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1323-1328, September.
  8. Otrok, Christopher, 2001. "On measuring the welfare cost of business cycles," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 61-92, February.
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  10. Nourry, C., 1998. "Stability of Equilibria in the Overlapping Generations Model with Endogenous Labor Supply," G.R.E.Q.A.M. 98a01, Universite Aix-Marseille III.
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  16. Homburg, Stefan, 1990. "The Efficiency of Unfunded Pension Schemes," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 640-647.
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  22. Heijdra, Ben J. & Mierau, Jochen O., 2010. "Growth Effects Of Consumption And Labor-Income Taxation In An Overlapping-Generations Life-Cycle Model," Macroeconomic Dynamics, Cambridge University Press, vol. 14(S2), pages 151-175, November.
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Cited by:
  1. Torben Andersen & Joydeep Bhattacharya, 2008. "On Myopia as Rationale for Social Security," CESifo Working Paper Series 2401, CESifo Group Munich.
  2. Lisi Shi & Richard M. H. Suen, 2014. "The Macroeconomic Consequences of Asset Bubbles and Crashes," Working papers 2014-14, University of Connecticut, Department of Economics.

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