On Sustainable Pay-As-You-Go Systems

Gabrielle Demange

No 4966, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: An unfunded Social Security system faces a major risk, sometimes referred to as ?political risk?. In order to account properly for this risk, the paper considers a political process in which the support to the system is asked from each newborn generation. The analysis is conducted in an overlapping generations economy that is subject to macroeconomic shocks. As a consequence, the political support varies with the evolution of the economy. The impact of various factors ?intra-generational redistribution, risk aversion, financial markets, governmental debt- on the political sustainability of a pay-as-you-go system is discussed.

Keywords: Pay-as-you-go; Intra-generational redistribution; Overlapping generations; Social security system; Political economy; Risk (search for similar items in EconPapers)
JEL-codes: C72 C78 (search for similar items in EconPapers)
Date: 2005-03
New Economics Papers: this item is included in nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: On sustainable pay as you go systems (2005)
Working Paper: On sustainable pay as you go systems (2005)
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