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Social security and intergenerational redistribution

Author

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  • Bhattacharya, Joydeep
  • Reed, Robert R.

Abstract

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.

Suggested Citation

  • Bhattacharya, Joydeep & Reed, Robert R., 2005. "Social security and intergenerational redistribution," ISU General Staff Papers 200505010700001193, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200505010700001193
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    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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