TY  - UNPD
A1  - Harenberg, Daniel
A1  - Ludwig, Alexander
T1  - Social security in an analytically tractable overlapping generations model with aggregate and idiosyncratic risk
T2  - SAFE working paper series ; No. 71
N2  - When markets are incomplete, social security can partially insure against idiosyncratic and aggregate risks. We incorporate both risks into an analytically tractable model with two overlapping generations. We derive the equilibrium dynamics in closed form and show that joint presence of both risks leads to over-proportional risk exposure for households. This implies that the whole benefit from insurance through social security is greater than the sum of the benefits from insurance against each of the two risks in isolation. We measure this through interaction effects which appear even though the two risks are orthogonal by construction. While the interactions unambiguously increase the welfare benefits from insurance, they can in- or decrease the welfare costs from crowding out of capital formation. The net effect depends on the relative strengths of the opposing forces.
T3  - SAFE working paper - 71 [v.2] 
KW  - social security
KW  - idiosyncratic risk
KW  - aggregate risk
KW  - welfare
KW  - insurance
KW  - crowding out
Y1  - 2015
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/37818
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-378186
UR  - http://ssrn.com/abstract=2515696
IS  - This Version: April 13, 2015
PB  - SAFE
CY  - Frankfurt am Main
ER  -