Time-Inconsistent Preferences and Social Security

Ayse Imrohoroglu, Selahattin Imrohoroglu and Douglas H. Joines

The Quarterly Journal of Economics, 2003, vol. 118, issue 2, 745-784

Abstract: In this paper we examine the role of social security in an economy populated by overlapping generations of individuals with time-inconsistent preferences who face mortality risk, individual income risk, and borrowing constraints. We find that unfunded social security lowers the capital stock, output, and consumption for consumers with time-consistent or time-inconsistent preferences. However, it may raise or lower welfare depending on the strength of time inconsistency.

Date: 2003
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Working Paper: Time inconsistent preferences and Social Security (2000)
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