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A Note on Social Security and Public Debt

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  • Luciano Greco

    ()
    (University of Padua)

Abstract

In a simple stochastic overlapping generation model, individuals work when young and retire when old, generations’ productivity is affected by a serially uncorrelated random shock, and fiat money and nominal public debt are the only storable assets. In this setting, we show that social security programs featured by a constant contribution rate and budget-balance in each period, as common in the literature, are Pareto-dominated by programs allowing for budget unbalance, compensated by variations of the outstanding nominal public debt.

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Bibliographic Info

Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0083.

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Length: 23 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:pad:wpaper:0083

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Keywords: Intergenerational risk sharing; social security; public debt; inflation;

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References

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  1. John Y. Campbell & Yves Nosbusch, 2006. "Intergenerational Risksharing and Equilibrium Asset Prices," NBER Working Papers 12204, National Bureau of Economic Research, Inc.
  2. Dirk Krueger & Felix Kubler, 2002. "Intergenerational Risk-Sharing via Social Security when Financial Markets Are Incomplete," American Economic Review, American Economic Association, vol. 92(2), pages 407-410, May.
  3. Enders, Walter & Lapan, Harvey E, 1982. "Social Security Taxation and Intergenerational Risk Sharing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 647-58, October.
  4. Henning Bohn, 2004. "Intergenerational Risk Sharing and Fiscal Policy," 2004 Meeting Papers 22, Society for Economic Dynamics.
  5. Piero Gottardi & Felix Kubler, 2006. "Social Security and Risk Sharing," CESifo Working Paper Series 1705, CESifo Group Munich.
  6. V. V. Chari & Patrick J. Kehoe, 1999. "Optimal Fiscal and Monetary Policy," NBER Working Papers 6891, National Bureau of Economic Research, Inc.
  7. Eric Leeper & Tack Yun, 2006. "Monetary-fiscal policy interactions and the price level:Background and beyond," International Tax and Public Finance, Springer, vol. 13(4), pages 373-409, August.
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Cited by:
  1. Çagaçan Deger, 2008. "Pension Reform in an OLG Model with Multiple Social Security Systems," ERC Working Papers 0805, ERC - Economic Research Center, Middle East Technical University, revised Oct 2008.

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