Demographic Uncertainty and Welfare in a Life-Cycle Model Under Alternative Public Pension Systems

Muhammad Rahman ()
Additional contact information
Muhammad Rahman: Indiana University Bloomington

No 2008-024, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: In this paper, I analyze consumption, aggregate savings, output and welfare implications of five different social security arrangements whenever there is demographic uncertainty. Following Bohn (2002), I analyze the effect of an uncertain population growth in an extended version of a modified Life-cycle model developed by Gertler (1999). Population growth dampens savings and output under all arrangements. Pay-as-you-go-Defined Benefit system appears to fare better than all other alternatives, falling short of the private annuity market with no pension system. But social security in general increases social welfare, with Fully Funded systems faring the best. Thus there appears to be a clear trade between growth and social welfare. The social security system also reduces the volatility of the economy.Length: 47 pages

Keywords: Demographic uncertainty; Social welfare; Life-cycle model; Annuity market; Pay-as-you-go; Fully funded; Defined benefit; Defined contribution (search for similar items in EconPapers)
JEL-codes: E21 E62 E64 H23 H24 H41 H55 J18 J26 (search for similar items in EconPapers)
Date: 2008-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://caepr.indiana.edu/RePEc/inu/caeprp/caepr2008-024.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inu:caeprp:2008024

Access Statistics for this paper

More papers in CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington Contact information at EDIRC.
Bibliographic data for series maintained by Center for Applied Economics and Policy Research ().