IDEAS home Printed from
   My bibliography  Save this paper

Pay-as-you-go Pension Systems as Incomplete Social Contracts


  • Andreas Wagener


We model a pay-as-you-go (PAYG) pension system as a series of incomplete intergenerational contracts. Each generation pays a pension to its parents as the price for a premortal transferral of economic property rights. The terms of this intergenerational trade are fixed in a social contract, which due to its long-term nature is incomplete and likely to be renegotiated after some of the initial uncertainty has been resolved. In between, however, investments and education efforts have to be carried out which affect the value of the economic resources to be transferred between generations. This set-up creates a number of intergenerational externalities (including a canonical hold-up problem) which may contribute to the explanation of those problems that real-world PAYG public pension systems currently face.

Suggested Citation

  • Andreas Wagener, 1997. "Pay-as-you-go Pension Systems as Incomplete Social Contracts," Volkswirtschaftliche Diskussionsbeiträge 62-97, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  • Handle: RePEc:sie:siegen:62-97

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Pay-as-you-go Pension Systems; Incomplete Contracts; Social Contracts;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sie:siegen:62-97. 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: (Michael Gail). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.