Social Security Reform with Heterogeneous Agents

Juan Carlos Conesa () and Dirk Krueger ()

Review of Economic Dynamics, 1999, vol. 2, issue 4, pages 757-795

Abstract: This paper analyzes the quantitative role of idiosyncratic uncertainty in an economy in which rational agents vote on hypothetical social security reforms. We find that the role of a pay-as-you-go social security system as a partial insurance and redistribution device significantly reduces political support for a transition to an economy with a fully funded system. We conclude that the status quo bias in favor of an unfunded social security system is stronger in economies in which agents of similar age differ significantly with respect to labor earnings and wealth due to idiosyncratic income uncertainty. (Copyright: Elsevier)

Keywords: social security reform; transition; idiosyncratic uncertainty (search for similar items in EconPapers)
JEL-codes: H55 E62 H3 (search for similar items in EconPapers)
Date: 1999
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