Generational selfishness and social security: a time-inconsistency problem in parametric reforms of PAYG
This paper examines the increase in generational selfishness in parametric reforms of pay-as-you-go (PAYG) pension systems as a potential outcome of the time-inconsistency problem in optimal policies. When an adverse demographic shock occurs, the planner has to decide on its generational distribution in a parametric reform meant to keep the PAYG system running: benefits can be fixed for seniors or taxes can be stabilized for the young. This paper shows that if the compromising optimal policy between these two extreme examples is nonbinding, it becomes time-inconsistent. And, parametric reforms tend to be biased in favor of contemporaneous generations, unfair in terms of generational justice, and inefficient in terms of the optimal level of consumption.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 13 (2010)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/GPRE19 |
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/GPRE19|
When requesting a correction, please mention this item's handle: RePEc:taf:jpolrf:v:13:y:2010:i:2:p:179-190. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.