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Social Security and Intergenerational Redistribution

  • Bhattacharya, Joydeep
  • Reed, Robert

Many countries around the world have large public pension programs with significant cross-cohort redistribution. This paper provides a rationale for such programs in a lifecycle framework with search and matching frictions in the labor market. In the model, public pension programs alter the age composition of the labor force by inducing the jobless elderly to retire. This improves the allocation of workers to jobs, raises firm entry and may also improve welfare. By requiring a long history of labor market attachment as a precondition to receiving benefits, these programs raise the future value of current employment for the young. This redistributes bargaining strength and income from the young to the old.

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File URL: http://www2.econ.iastate.edu/papers/p1841-2006-08-01.pdf
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12661.

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Date of creation: 01 Aug 2006
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Handle: RePEc:isu:genres:12661
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Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070

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