Social security as Markov equilibrium in OLG models: Clarifications and some new insights

Armando R. Lopez-Velasco

Economics Letters, 2022, vol. 217, issue C

Abstract: This paper studies the politico-economic sustainability of pay-as-you-go social security in OLG models under Markovian strategies as first studied by Forni (2005). Under logarithmic utility, the paper shows that equilibria with social security can only exist if the underlying economy is dynamically inefficient. The paper also derives the exact parametric conditions that allow for the existence of equilibria and shows that among all the admissible (arbitrary) constants that produce a Markov perfect equilibrium, the maximum constant in such set yields the only equilibrium that solves dynamic inefficiency.

Keywords: Social security; Political-economy model; Overlapping generations; Markov perfect; Golden rule; Dynamic inefficiency (search for similar items in EconPapers)
JEL-codes: C72 E24 H55 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:217:y:2022:i:c:s0165176522002427

DOI: 10.1016/j.econlet.2022.110707

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