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On myopia as rationale for social security

  • Torben Andersen

    ()

  • Joydeep Bhattacharya

    ()

This paper revisits the role played by myopia in generating a theoretical rationale for pay-as-you-go social security in dynamically efficient economies. Contrary to received wisdom, if the real interest rate is exogenously fixed, enough myopia may justify public pensions but never alongside positive private savings. With sufficient myopia, co-existence of positive optimal pensions and positive private saving is possible if the real interest rate on saving evolves endogenously, as in a model with a neoclassical technology.

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File URL: http://hdl.handle.net/10.1007/s00199-010-0528-z
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 47 (2011)
Issue (Month): 1 (May)
Pages: 135-158

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Handle: RePEc:spr:joecth:v:47:y:2011:i:1:p:135-158
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  1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  2. Martin Feldstein, 1982. "The Optimal Level of Social Security Benefits," NBER Working Papers 0970, National Bureau of Economic Research, Inc.
  3. Torben M. Andersen & Joydeep Bhattacharya, 2009. "Unfunded pensions and endogenous labor supply," Economics Working Papers 2009-16, School of Economics and Management, University of Aarhus.
  4. Faruk Gul & Wolfgang Pesendorfer, 2007. "Welfare without Happiness," American Economic Review, American Economic Association, vol. 97(2), pages 471-476, May.
  5. CREMER, Helmuth & DE DONDER, Philippe & MALDONADO, Dario & PESTIEAU, Pierre, 2008. "Forced saving, redistribution and nonlinear social security schemes," CORE Discussion Papers 2008020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Louis Kaplow, 2006. "Myopia and the Effects of Social Security and Capital Taxation on Labor Supply," NBER Working Papers 12452, National Bureau of Economic Research, Inc.
  7. Jose Apesteguia & Miguel Angel Ballester, 2007. "A Theory of Reference-Dependent Behavior," Working Papers 323, Barcelona Graduate School of Economics.
  8. Fernando Perera-Tallo & Hideo Konishi, 1997. "Existence of steady - state equium in an overlapping-generations model with production (*)," Economic Theory, Springer, vol. 9(3), pages 529-537.
  9. Laurence J. Kotlikoff, 1987. "Justifying Public Provision of Social Security," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 674-696.
  10. Jappelli, Tullio & Pagano, Marco, 1988. "Consumption and Capital Market Imperfection: An International Comparison," CEPR Discussion Papers 244, C.E.P.R. Discussion Papers.
  11. repec:cup:cbooks:9780521001151 is not listed on IDEAS
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