A model of first and second-best social security programs

Walter Enders and Harvey Lapan

Journal of Economics, 1993, vol. 58, issue 1, 65-90

Abstract: This paper employs an overlapping generations model with output uncertainty to investigate how second-best social security schemes can be used to affect expected welfare. As with actual pension plans, our social security plan entails a proportional tax on earned income but provides a rebate that is not directly proportional with that individual's contributions. Thus, under certainty, the plan distorts the labor/leisure choice and lowers welfare. However, we prove that with uncertainty a range of such plans exist which raise expected welfare because it enhances intergenerational risk sharing. Using Monte Carlo experiments we derive the characteristics of the optimal second best plan. Copyright Springer-Verlag 1993

Date: 1993
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1007/BF03052292 (text/html)
Access to full text is restricted to subscribers.

Related works:
Journal Article: A model of first and second-best social security programs (1993)
Working Paper: A Model of First and Second-Best Social Security Programs (1993)
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:kap:jeczfn:v:58:y:1993:i:1:p:65-90

DOI: 10.1007/BF03052292

Access Statistics for this article

Journal of Economics is currently edited by Giacomo Corneo

More articles in Journal of Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().