Social security, bequests, and social comparisons

Kirill Borissov and Andrei Kalk

Journal of Public Economic Theory, 2024, vol. 26, issue 3

Abstract: We examine the long‐run impact of unfunded social security on capital stock and wealth inequality in an overlapping generations (OLG) model where newborn individuals differ in their inheritance. In our model, individuals' decisions are subject to social comparisons, which can lead to overspending on personal consumption and result in zero bequests left within poor families. In this scenario, unfunded social security increases long‐run wealth inequality by redistributing wealth from poor to rich families, who always leave bequests. However, it increases long‐run capital stock, too. We also show that when none or all of the families leave bequests in the long run, our model predicts negative and neutral effects of social security on capital accumulation, in line with the standard OLG models of Diamond and Barro. Thus, our results emphasize the need to account for heterogeneity in bequest behavior in the analysis of social security.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/jpet.12698

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:26:y:2024:i:3:n:e12698

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923

Access Statistics for this article

Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().