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Social Security, the Golden Rule and the Optimal Allocation of Resources : the Case of Endogenous Retirement and a Strategic Bequest Motive


  • Aylott, G


Following the seminal work of Samuelson (1975), a theoretical literature has grown examining the macroeconomic relationship between social security, aggregate saving and the allocation of resources within an overlapping generations economy. One such paper by Hu (1979) suggests inter alia that a "pay-as-you-go" (PAYG) pension scheme cannot secure the optimal allocation of resources in the presence of either endogenous retirement or a bequest motive. This paper aims to extend the analysis of this issue, by showing that a suitably designed two tier PAYG pension scheme can in fact secure the first best outcome in the presence of endogenous retirement, provided either that no bequest motive is present, or that it takes the strategic form introduced by Bernheim et al.

Suggested Citation

  • Aylott, G, 1996. "Social Security, the Golden Rule and the Optimal Allocation of Resources : the Case of Endogenous Retirement and a Strategic Bequest Motive," The Warwick Economics Research Paper Series (TWERPS) 473, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:473

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    References listed on IDEAS

    1. Potter, Simon M, 1995. "A Nonlinear Approach to US GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 109-125, April-Jun.
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    3. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    4. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
    5. Clements, Michael P & Hendry, David F, 1996. "Multi-step Estimation for Forecasting," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 657-684, November.
    6. Diebold, Francis X. & Nason, James A., 1990. "Nonparametric exchange rate prediction?," Journal of International Economics, Elsevier, vol. 28(3-4), pages 315-332, May.
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    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions


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