Social insurance for the elderly

Se Yung Bae, Junkee Jeon, Hyeng Keun Koo and Kyunghyun Park

Economic Modelling, 2020, vol. 91, issue C, 274-299

Abstract: We study the effects of retirement benefits provided by social insurance programs on consumption, portfolio choice, and retirement in a continuous-time theoretical model. We show that people tend to retire earlier with an increase in retirement social insurance benefits (SIBs), consistent with empirical evidence. We show also that people tend to increase savings before retirement in anticipation of increased retirement benefits, a counter-intuitive result. The response of risky investment with an increase in the SIBs is ambiguous, depending on parameter values. The overall social welfare will increase with an increase in SIBs if the balanced budget constraint is satisfied. We also investigate the effects of changes in the two streams of the SIBs (paid in perishable goods and cash) and the proportion of workers in entire population on social welfare.

Keywords: Social insurance; Consumption; Investment; Retirement; Social welfare (search for similar items in EconPapers)
JEL-codes: E21 G11 J24 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:91:y:2020:i:c:p:274-299

DOI: 10.1016/j.econmod.2020.05.021

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