Social Security and Trust Fund Management

Takashi Oshio, 隆士 小塩 and タカシ オシオ

No 192, Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: In this paper we investigate why and to what extent the government should have a social security trust fund, and how it should manage the fund in the face of demographic shocks, based on a simple overlapping-generations model. We show that the government should have a trust fund in some form, given an aging population, to achieve the (modified) golden rule or to offset the negative income effect of a PAYGO system. Besides, in a closed economy where factor-prices effects dominate, it is not advisable to use the trust fund as a buffer for demographic shocks, because it could lead to a widening of intergenerational inequality. We also the discuss policy implications of our analysis on the social security reform debate in Japan, including the fixed tax method and the use of the trust fund in the face of a rapidly aging population.

Keywords: trust fund; social security; intergenerational equity (search for similar items in EconPapers)
JEL-codes: H23 H55 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2004-01
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:piedp1:192

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