Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-10T21:12:37.222Z Has data issue: false hasContentIssue false
  • English
  • Français

UNFUNDED PENSIONS AND ENDOGENOUS LABOR SUPPLY

Published online by Cambridge University Press:  06 March 2012

Torben M. Andersen  and
Joydeep Bhattacharya
Torben M. Andersen
Affiliation:
University of Aarhus
Joydeep Bhattacharya*
Affiliation:
Iowa State University
*
Address correspondence to: Joydeep Bhattacharya, Department of Economics, Iowa State University, Ames, IA 50011-1070, USA; e-mail: joydeep@iastate.edu.
Get access Rights & Permissions [Opens in a new window]

Abstract

A classic result in dynamic public economics states that there is no welfare rationale for pay-as-you-go (PAYG) pensions in a dynamically efficient overlapping-generations economy with exogenous labor supply. Parenthetically, a welfare justification for PAYG pensions exists if the economy is dynamically inefficient. Under the sufficient condition that the old be no less risk-averse than the young, both these results extend to an economy with endogenous labor supply.

Keywords

PensionsSocial SecurityDynamic EfficiencyEndogenous Labor Supply
Type
Articles
Information
Macroeconomic Dynamics , Volume 17 , Issue 5 , July 2013 , pp. 971 - 997
Copyright
Copyright © Cambridge University Press 2012 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Aaron, Henry (1966) The social insurance paradox. Canadian Journal of Economics 32, 371–374.Google Scholar
Abel, Andrew B., Mankiw, N. Gregory, Summers, Lawrence H., and Zeckhauser, Richard J. (1989) Assessing dynamic efficiency: Theory and evidence. Review of Economic Studies 56, 1–19.CrossRefGoogle Scholar
Andersen, Torben M. and Bhattacharya, Joydeep (2011) On myopia as rationale for social security. Economic Theory 47, 135–158.CrossRefGoogle Scholar
Auerbach, Alan J. and Kotlikoff, Lawrence J. (1987) Dynamic Fiscal Policy. New York: Cambridge University Press.Google Scholar
Barbie, Martin, Hagedorn, Marcus, and Kaul, Ashok (2004) Assessing aggregate tests of efficiency for dynamic economies. Topics in Macroeconomics 4 (1), Article 16.Google Scholar
Blake, David (2006) Pension Economics. Hoboken, NJ: Wiley.Google Scholar
Blanchard, O. and Fischer, S. (1989) Lectures on Macroeconomics. Cambridge, MA: MIT Press.Google Scholar
Breyer, Friedrich and Straub, Martin (1993) Welfare effects of unfunded pension systems when labor supply is endogenous. Journal of Public Economics, 50 (1), 77–91.CrossRefGoogle Scholar
Caliendo, Frank N. and Gahramanov, Emin (2011) Myopia and pensions in general equilibrium. Journal of Economics and Finance 35, 470–502.Google Scholar
Cazzavillan, Guido and Pintus, Patrick A. (2004) Robustness of multiple equilibria in OLG economies. Review of Economic Dynamics 7, 456–475.CrossRefGoogle Scholar
Conesa, Juan C. and Garriga, Carlos (2003) Status quo problem in social security reforms. Macroeconomic Dynamics 7, 691–710. [doi:10.1017/S1365100502020217]CrossRefGoogle Scholar
Conesa, Juan C. and Krueger, D. (1999) Social security reform with heterogeneous agents. Review of Economics Dynamics 2, 757–795.CrossRefGoogle Scholar
Cooley, Thomas F. and Soares, Jorge (1999) A positive theory of social security based on reputation. Journal of Political Economy 107 (1), 135–160.CrossRefGoogle Scholar
Diamond, Peter A. (1965) National debt in a neoclassical growth model. American Economic Review 55 (5), 1126–1150.Google Scholar
Fuster, Luisa, Imrohoroglu, Ayse, and Imrohoroglu, Selahattin (2007) Elimination of social security in a dynastic framework. Review of Economic Studies 74 (1), 113–145.CrossRefGoogle Scholar
Galasso, Vincenzo and Profeta, Paola (2004) Lessons for an aging aociety: The political sustainability of social security systems. Economic Policy 19, 63–115.CrossRefGoogle Scholar
Halek, Martin and Eisenhauer, Joseph G. (2001) Demography of risk aversion. Journal of Risk and Insurance 68 (1), 1–24.CrossRefGoogle Scholar
Hansen, Lars Peter and Singleton, Kenneth J. (1983) Stochastic consumption, risk aversion, and the temporal return of asset returns. Journal of Political Economy 91, 249–265.CrossRefGoogle Scholar
Heijdra, Ben J. and Mierau, Jochen O. (2010) Growth effects of consumption and labor-income taxation in an overlapping-generations life-cycle model. 14, 151–175.CrossRefGoogle Scholar
Homburg, Stefan (1990) The efficiency of unfunded pension schemes. Journal of Institutional and Theoretical Economics 146, 640–647.Google Scholar
Krueger, Dirk (2006) Public insurance against idiosyncratic and aggregate risk: The case of social security and progressive taxation. CESifo Economic Studies 52, 587–620.CrossRefGoogle Scholar
Lopez-Garcia, Miguel-Angel (2008) On the role of public debt in an OLG model with endogenous labor supply. Journal of Macroeconomics 30, 1323–1328.CrossRefGoogle Scholar
Meyer, Donald J. and Meyer, Jack (2005) Relative risk aversion: What do we know? Journal of Risk and Uncertainty 31, 243–262.CrossRefGoogle Scholar
Nourry, Carine (2001) Stability of equilibria in the overlapping generations model with endogenous labor supply. Journal of Economic Dynamics and Control 25, 1647–1663.CrossRefGoogle Scholar
Nourry, Carine and Alain, Venditti (2006) Overlapping generations model with endogenous labor supply: General formulation. Journal of Optimization Theory and Applications 128 (2), 355–377.CrossRefGoogle Scholar
Otrok, Chris (2001) On measuring the welfare cost of business cycles. Journal of Monetary Economics 47, 61–92.CrossRefGoogle Scholar
Salm, Martin (2010) Subjective mortality expectations and consumption and saving behaviours among the elderly. Canadian Journal of Economics 43, 1040–1057.CrossRefGoogle Scholar
Samuelson, Paul A. (1958) An exact consumption-loan model of interest with or without the social contrivance of money. Journal of Political Economy 66 (6), 467–482.CrossRefGoogle Scholar
Samuelson, Paul A. (1975) Optimum social security in a life-cycle growth model. International Economic Review 16 (3), 539–544.CrossRefGoogle Scholar