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Social Security Taxation and Intergenerational Risk Sharing


  • Enders, Walter
  • Lapan, Harvey E.


The life cycle hypothesis has become the dominant mode used to analyze the effects of a social security system on private saving, the labor/leisure choice, and social welfare. As both Barro and Samuelson indicate, a fully funded Social Security program (in a world of certainty) would drive out an equivalent amount of private saving. If the interest rate is r, the effects of a payment of a dollar into the social security pool while young would just offset* the effects of receiving (1+r) dollars as a transfer when retired. Papers by Diamond, Hi», and Samuelson, among others, have examined the effects of non-fully funded Social Security schemes in a growing economy. A non-fully funded program can be used to alter the private sector's saving rate and, hence, the capital/labor ratio. Social Security, then, can be used as a policy tool for achieving the (or some variant of the) golden rule growth path.

Suggested Citation

  • Enders, Walter & Lapan, Harvey E., 1979. "Social Security Taxation and Intergenerational Risk Sharing," ISU General Staff Papers 197907010700001091, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genstf:197907010700001091

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