Aging, Social Security Design, and Capital Accumulation

Abstract

This paper analyzes the impact of aging on capital accumulation and welfare in a country with a sizable unfunded social security system. Using a two-period overlapping-generation model with endogenous retirement decisions, we show that both the type of aging and the type of unfunded social security system are important in understanding this impact. We consider two demographic changes, declining fertility and increasing longevity, and three types of pensions, defined contributions, defined benefits and defined annuities, to investigate the differences in implications of aging.

The Serendipity Theorem for an Endogenous Open Economy Growth Model

“…By implication, we do not model pay-as-you-go pension systems with defined benefits or contributions [12] but instead forward looking savings and equal consumption, where the latter is a social equilibrium assumption similar to that in [13].…”

Longevity Variations and the Welfare State

“…They also show that raising the retirement age as a response to an increase in longevity dampens the growth gains. In the same vein, Dedry et al (2014) provides a comparison of several different institutional settings, i.e. different social security systems and retirement age policies, and types of aging in a unified framework.…”

The Inherited Inequality: How Demographic Aging and Pension Reforms can Change the Intergenerational Transmission of Wealth

“…Also, like Dedry et al . () who study the impact of aging on capital accumulation and welfare in economies with unfunded pensions, it deals with the differential impact of fertility and mortality changes with emphasis on the structure and the distribution of wealth. The paper is also related to an important literature that focuses on the saving behavior of the elderly by looking at alternative motives and at individual characteristics (see, for instance, De Nardi et al ., ; Ameriks et al ., ).…”