Endogenous Social Security Financial Crises
This paper addresses the causes and dynamics of pay-as-you-go social security financial crises. Its main hypothesis is there exists a self-reinforcing vicious circle between the social security system, the fertility rate and labor supply. We argue that changes in the pay-as-you-go social security tax rate may induce a subsequent demographic transition and a decline in supply of labor. Theses effects cause the system to be unsustainable, as fewer individuals pay social security taxes but more individuals receive social security benefits over time. A direct policy implication is that governments are required to adjust either the tax rate and/or the benefits of the social security system. Further, we show that when the government maintains its promised payments of benefits, the social security tax rate will follow a unit-root process that grows through time. We test our predictions concerning the fertility rate and labor supply by using the case of Chile as an experiment. The empirical analysis shows support for our hypotheses concerning fertility rate and labor supply. Later, we show evidence of a unit-root process in the social security tax rate by using data from a number of OECD countries.
|Date of creation:||2003|
|Date of revision:|
|Publication status:||Published as "On Endogenous Social Security Crisis", Journal of Population Economics, Vol. 18, Nº 3, pp. 509-517, 2005.|
|Contact details of provider:|| Postal: |
Phone: (562) 354-4303
Fax: (562) 553-1664
Web page: http://www.economia.puc.cl
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zhang, Jie, 1995. "Social security and endogenous growth," Journal of Public Economics, Elsevier, vol. 58(2), pages 185-213, October.
When requesting a correction, please mention this item's handle: RePEc:ioe:doctra:250. 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: (Jaime Casassus)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.