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Demography and Uncertainty in Economic Growth: An Application to Social Security


  • Miguel Sánchez Romero

    (Universidad Autónoma de Madrid)


The aim of this paper is to study the impact on economic growth of public pension systems, both funded and unfunded, under different demographic scenarios with a competitive economy and a fixed labor supply. An OLG growth model is used with realistic demography, in which each individual can be traced throughout her lifecycle, by using a longitudinal accounting framework. Under this setup, I find that both funded and unfunded pension systems can achieve the same steady state, either the «modified golden rule» or the «golden rule,» as long as the population increases. Nonetheless, the dynamic transition of each social security system to this steady state differs. This result shows that when labor supply is inelastic public pension systems do not necessarily alter the capital stock in the long run.

Suggested Citation

  • Miguel Sánchez Romero, 2007. "Demography and Uncertainty in Economic Growth: An Application to Social Security," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 30(83), pages 027-056, Mayo-Agos.
  • Handle: RePEc:cud:journl:v:30:y:2007:i:83:p:027-056

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    More about this item


    Overlapping generations; Demography; Multiple equilibria; Social Security; Crowding-out effect;

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General


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