This paper extends the Auerbach-Kotlikoff life-cycle simulation model by incorporating demographic change, including lifespan extension, and multiple earnings groups within each cohort. The model is used to study the U.S. demographic transition. To ensure a realistic pattern of fertility by age, the model assumes that each agent gives birth to fractions of children during his child-bearing ages. The new model can also initiate transitions from arbitary initial conditions. The baseline simulation, which assumes a continuation of social security pay-as-you-go finance, exhibits sharp increases over time in the payroll tax rate. This increase siphons away so much saving that capital shallowing, rather than capital deepening, occurs over time. Hence, general equilibrium feedback effects exacerbate, rather than mitigate, the problems arising from population aging. The paper also simulates a range of policy reforms, including privatizing social security with different finance mechanisms. The simulations indicate that, compared with a continuation of current policy, privating social security would generate very major long-run welfare gains, particularly for the poorest members of society.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Cited by: (explanations, 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.)
Troy Davig & Eric M. Leeper, 2006.
"Generalizing the Taylor Principle,"
Caepr Working Papers
2006-001, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
[Downloadable!]
Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 210000 papers.