Pareto improving social security reform when financial markets are incomplete!?

  • This paper studies an overlapping generations model with stochastic production and incomplete markets to assess whether the introduction of an unfunded social security system leads to a Pareto improvement. When returns to capital and wages are imperfectly correlated a system that endows retired households with claims to labor income enhances the sharing of aggregate risk between generations. Our quantitative analysis shows that, abstracting from the capital crowding-out effect, the introduction of social security represents a Pareto improving reform, even when the economy is dynamically effcient. However, the severity of the crowding-out effect in general equilibrium tends to overturn these gains. Klassifikation: E62, H55, H31, D91, D58 . April 2005.

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Metadaten
Author:Dirk KruegerORCiDGND, Felix Kubler
URN:urn:nbn:de:hebis:30-10881
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,12
Series (Serial Number):CFS working paper series (2005, 12)
Document Type:Working Paper
Language:English
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:Aggregate Fluctuations; Incomplete Markets; Intergenerational Risk Sharing; Social Security Reform
GND Keyword:Sozialversicherung; Reform
Issue:April 2005
HeBIS-PPN:197307493
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht