Uncertain Lifetimes and the Implicaitons of Social Security in an Endogeneous Communication Model

Kiyoung Lee
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Kiyoung Lee: Kyonggi University

Korean Economic Review, 2000, vol. 16, 391-408

Abstract: This paper examines the implications of a social security program in the presence of private information on survival probabilities for the Pareto efficiency of real allocations when the private annuity market is characterized by endogenous communication. It turns out that the implications of a social security system are significantly changed V the private annuity market is characterized by endogenous communication: first, a mandatory social security type program cannot yield Pareto superior allocations; second while the publicly provided annuity program is a perfect substitute for the pooling contract from the view point of all the agents, it is different, and exists simultaneously with, privately supplied supplementary annuities for the high-risk groups; third, the implications for aggregate private savings are different depending on the level of the public program. It is noteworthy that there exist no Pareto improving roles for government policies in our endogenous information-sharing set-up despite the fact that the high-risk group exerts a negative externality on the low-risk group as in the other models of private information.

Keywords: Endogeneous Communication; Social Security; Uncertain Lifetimes (search for similar items in EconPapers)
JEL-codes: G22 H55 (search for similar items in EconPapers)
Date: 2000
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