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Social Security In A Model With Altruistic Bequest And Differential Lifetime Uncertainty And Ability


  • Luisa Fuster

    (University of Western Ontario and Universitat Pompeu Fabra)

  • Selahattin Imrohoroglu

    (University of Southern California)

  • Ayse Imrohoroglu

    (University of Southern California)


In this paper we evaluate the impact of social security on capital accumulation and welfare in an environment with differential lifespan uncertainty and age-efficiency profiles induced by a generational `ability shock'. We construct a general equilibrium model populated with overlapping generations of finite but random-lived individuals facing borrowing constraints and individual income shocks. Preferences are altruistic: individuals derive utility from their own lifetime consumption and from the felicity of their predecessors and descendents. For a newborn, the realization of the generationally-persistent ability shock not only determines his age-efficiency profile, but his type-dependent vector of conditional survival probabilities. We find that (\QTR{it}{i}) aggregate capital is resilient to social security reform, (\QTR{it}{ii}) new borns prefer to be born into an economy with no social security, (\QTR{it}{iii}) when the welfare measure is conditioned on the agent type some agents prefer to be born in an economy with social security though (iv) they are willing to pay the transitional costs towards privatization if their ability is low.

Suggested Citation

  • Luisa Fuster & Selahattin Imrohoroglu & Ayse Imrohoroglu, 2000. "Social Security In A Model With Altruistic Bequest And Differential Lifetime Uncertainty And Ability," Computing in Economics and Finance 2000 350, Society for Computational Economics.
  • Handle: RePEc:sce:scecf0:350

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    References listed on IDEAS

    1. Miles Corak & Andrew Heisz, 1999. "The Intergenerational Earnings and Income Mobility of Canadian Men: Evidence from Longitudinal Income Tax Data," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 504-533.
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    5. Jeremy Greenwood & Nezih Guner & John A. Knowles, 2003. "More on Marriage, Fertility, and the Distribution of Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 827-862, August.
    6. R. A. Moffitt, "undated". "The Effect of Welfare on Marriage and Fertility: What Do We Know and What Do We Need to Know?," Institute for Research on Poverty Discussion Papers 1153-97, University of Wisconsin Institute for Research on Poverty.
    7. Sheila Eastman, 1992. "Improving Outcomes for Divorced Women," Canadian Public Policy, University of Toronto Press, vol. 18(3), pages 318-326, September.
    8. Michael Charette & Ronald Meng, 1994. "The Determinants of Welfare Participation of Female Heads of Household in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 27(2), pages 290-306, May.
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