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Quantifying the risk-sharing welfare gains of social security

  • Olovsson, Conny

The welfare effects of intergenerational risk sharing through a pay-as-you-go social security system that is efficiently indexed to wages or interest rates are quantified. Comparing steady states, there are large welfare gains of being born into an economy with efficient risk sharing as compared to the current U.S. system. Efficient policy involves an increasingly risky net of tax income over the life cycle. When adjustment to steady state is taken into account, the welfare gains largely turn negative. The results are also compared and contrasted to the first best allocation.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 57 (2010)
Issue (Month): 3 (April)
Pages: 364-375

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Handle: RePEc:eee:moneco:v:57:y:2010:i:3:p:364-375
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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