Search for Financial Returns and Social Security Privatization
Alisdair McKay ()
Review of Economic Dynamics, 2013, vol. 16, issue 2, 253-270
I develop a general equilibrium model in which the quality of household financial decisions is endogenously determined by the incentives to exert effort in learning about financial opportunities. The model generates predictions for asset market participation and returns across households. Moreover, search for financial returns enables the model to generate a more skewed equilibrium wealth distribution. In this context, social security privatization affects household search effort, asset market participation and the competitiveness of the asset market. Privatization reduces average welfare and this reduction is somewhat magnified by the search friction. While some have suggested that household decision making could be important for the consequences of privatization, my analysis does not bear this out. (Copyright: Elsevier)
Keywords: Savings; Household finance; social security (search for similar items in EconPapers)
JEL-codes: E21 D14 H55 (search for similar items in EconPapers)
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Working Paper: Online Appendix to "Search for Financial Returns and Social Security Privatization" (2013)
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