PAYG pensions and economic cycles
AbstractThis article analyses the dynamics of an overlapping generations economy (Diamond, 1965) with pay-as-you-go financed public pensions and myopic expectations. It is shown that large PAYG pensions triggers economic fluctuations depending on the mutual relationship between technology and preference parameters. Our findings constitute a policy warning about the size of social security and provide another explanation of the occurrence of persistent cycles.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19984.
Date of creation: 12 Jan 2010
Date of revision:
Myopic foresight; PAYG pensions; Stability; OLG model;
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
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
This paper has been announced in the following NEP Reports:
- NEP-AGE-2010-01-23 (Economics of Ageing)
- NEP-ALL-2010-01-23 (All new papers)
- NEP-DGE-2010-01-23 (Dynamic General Equilibrium)
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