Social Security, the Golden Rule and the Optimal Allocation of Resources : the Case of Endogenous Retirement and a Strategic Bequest Motive
AbstractFollowing the seminal work of Samuelson (1975), a theoretical literature has grown examining the macroeconomic relationship between social security, aggregate saving and the allocation of resources within an overlapping generations economy. One such paper by Hu (1979) suggests inter alia that a "pay-as-you-go" (PAYG) pension scheme cannot secure the optimal allocation of resources in the presence of either endogenous retirement or a bequest motive. This paper aims to extend the analysis of this issue, by showing that a suitably designed two tier PAYG pension scheme can in fact secure the first best outcome in the presence of endogenous retirement, provided either that no bequest motive is present, or that it takes the strategic form introduced by Bernheim et al.
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Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 473.
Length: 14 pages
Date of creation: 1996
Date of revision:
RETIREMENT ; SOCIAL SECURITY ; OLD AGE BENEFITS;
Find related papers by JEL classification:
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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