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Social Security Reform with Heterogeneous Agents

Author

Listed:
  • Juan C. Conesa

    (Universidad de Barcelona and University of Minnesota)

  • Dirk Krueger

    (University of Minneapolis and Federal Reserve Bank of Minneapolis)

Abstract

This paper analyzes the quantitative role of idiosyncratic uncertainty in an economy in which rational agents vote on hypothetical social security reforms. We find that the role of a pay-as-you-go social security system as a partial insurance and redistribution device significantly reduces political support for a transition to an economy with a fully funded system. We conclude that the status quo bias in favor of an unfunded social security system is stronger in economies in which agents of similar age differ significantly with respect to labor earnings and wealth due to idiosyncratic income uncertainty. (Copyright: Elsevier)

Suggested Citation

  • Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
    • Handle: RePEc:red:issued:v:2:y:1999:i:4:p:757-795
    DOI: 10.1006/redy.1998.0039
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    social security reform; transition; idiosyncratic uncertainty;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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