A parametric social security system with skills heterogeneous agents

Fotini Thomaidou

No 2018-5, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: The purpose of this study is to explore the effects of exogenous social security system parameters on welfare. The set up is an overlapping generations economy, with skills heterogeneity, which distinguishes consumers between high and low skilled. The lowskilled receive an extra supplement pension. The social security system has three exogenous parameters: the benefits, the contributions, and the funding parameter. The author examines and compares the effects of these three exogenous social security parameters, first under inelastic and then under elastic labor supply, on individuals welfare. He finds that when labor supply is inelastic, the parameters affect differently the welfare of the high and the low-skilled, since for the latter, we must also take into account the indirect effects through the supplement pension provision. When labor supply is elastic, the effects of changes in the social security parameters on welfare are the same for both the high and the low skilled, as in the case of inelastic labor supply.

Keywords: social security; pensions; PAYGO; funded systems; welfare; skills heterogeneity (search for similar items in EconPapers)
JEL-codes: D11 E21 H55 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-age, nep-dge, nep-mac and nep-pbe
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https://www.econstor.eu/bitstream/10419/173130/1/1011146630.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:20185

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