The future of social security

Gonzalez-Eiras, Mart ́ õn; Niepelt, Dirk

doi:10.1016/j.jmoneco.2007.10.005

Cited by 75 publications

(55 citation statements)

References 26 publications

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“…These derivatives will be used in the numerical solution, as will be seen in the next subsection. The welfare effect, ∂U o,j t /∂τ t and ∂U y,j t /∂τ t , as well as the first-order conditions of (13) still follow (19), (21) and (23), respectively. Now, we turn to the Ramsey problem.…”

Section: Next We Consider Periodmentioning

confidence: 78%

“…Thus, they may strategically increase (reduce) τ t as compared to the case where the current political choice does not affect future policy outcomes. 19 Then, the first-order condition of (13) can be written as…”

Section: Political Equilibriummentioning

confidence: 99%

“…The positive overall general equilibrium effect implies that the marginal benefit of τ t to the current old households in the Ramsey problem tends to be larger than its counterpart in the political decision process. An exception is that for t = 1, the welfare effect of τ 1 on old households equals that in (19), since the capital in the initial period is predetermined (I 1,1 = 0). More specifically, we have Lemma 2 Assume that u (c) = log (c).…”

Section: Ramsey Solutionmentioning

confidence: 99%

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The Dynamics of Inequality and Social Security in General Equilibrium

Song

2009

SSRN Journal

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This paper analyzes the dynamic politico-economic equilibrium of a model where repeated voting on social security and the evolution of household characteristics in general equilibrium are mutually affected over time. In particular, we incorporate withincohort heterogeneity in a two-period Overlapping-Generation model to capture the intragenerational redistributive effect of social security transfers. Political decision-making is represented by a probabilistic voting à la Lindbeck and Weibull (1987). We analytically characterize the Markov perfect equilibrium, in which social security tax rates are shown to be increasing in wealth inequality. The dynamic interaction between inequality and social security leads to growing social security programs. We also perform some normative analysis, showing that the politico-economic equilibrium outcomes are fundamentally different from the Ramsey allocation.JEL Classification: E21 E62 H21 H55

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Section: Next We Consider Periodmentioning

confidence: 78%

Section: Political Equilibriummentioning

confidence: 99%

Section: Ramsey Solutionmentioning

confidence: 99%

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The Dynamics of Inequality and Social Security in General Equilibrium

Song

2009

SSRN Journal

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“…The retirement age in the steady state before the shock is given by (11). Using this condition yields:…”

Section: Increasing the Retirement Agementioning

confidence: 99%

Reforming the Pay-As-You-Go Pension System: Who Votes for it? When?

Casamatta¹,

Gondim²

2011

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We assess the political support for parametric reforms of the Pay-As-You-Go pension system following a downward fertility shock. Using a continuous time overlapping generations model, we argue that reforms that consist in cutting pension benefits or increasing the retirement age are likely to receive a strong political support. An increase in the contribution rate has, on the contrary, fewer chances to be approved by the majority of the voters. This framework also allows to identify the costs and benefits of postponing each type of reform and to determine how the timing of the different reforms affects their political support.

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“…E-mail: mge@alum.mit.edu. 1 Further work on Markov perfect equilibrium in economies with social security include Chen and Song (2009), Gonzalez-Eiras and Niepelt (2008), and Mateos-Planas (2008.…”

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confidence: 99%