Social Security, Optimality, and Equilibria in a Stochastic Overlapping Generations Economy |
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Authors: | Gabrielle Demange & Guy Laroque |
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Institution: | DELTA, ENS, Paris,;INSEE, France |
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Abstract: | Social security institutions implement intergenerational transfers and distribute risks over time. To compare various social security designs, we study an overlapping generations model with demographic shocks. Production takes place through a neoclassical production function subject to productivity shocks. We give a near characterization of optimal allocations. We study rational expectations equilibria when contributions are mandatory, based on labor and capital income. We also describe the equilibria of an economy with a voluntary pay-as-you-go social security fund, and show that they have a long-run optimality property. An example with Cobb–Douglas production and utility functions illustrates the results. |
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