Header

UZH-Logo

Maintenance Infos

Pareto-Improving Social Security Reform When Financial Markets Are Incomplete!?


Krüger, Dirk; Kübler, Felix (2006). Pareto-Improving Social Security Reform When Financial Markets Are Incomplete!? American Economic Review, 96(3):737-755.

Abstract

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.

Abstract

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.

Statistics

Citations

51 citations in Web of Science®
58 citations in Scopus®
Google Scholar™

Altmetrics

Downloads

27 downloads since deposited on 09 Jul 2014
13 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:June 2006
Deposited On:09 Jul 2014 14:30
Last Modified:05 Apr 2016 17:57
Publisher:American Economic Association
ISSN:0002-8282
Free access at:Official URL. An embargo period may apply.
Publisher DOI:https://doi.org/10.1257/aer.96.3.737
Official URL:http://www.jstor.org/stable/30034069
Other Identification Number:merlin-id:3509

Download

Preview Icon on Download
Preview
Content: Published Version
Filetype: PDF
Size: 778kB
View at publisher