Is Social Security Really Bad for Growth?

Giorgio Bellettini and Carlotta Berti Ceroni

Review of Economic Dynamics, 1999, vol. 2, issue 4, 796-819

Abstract: This paper develops a model of endogenous growth with overlapping generations to investigate the joint determination of social security, public investment and growth in a small open economy. We show that a pure pay-as-you-go-system with indexed to wages benefits provides the taxpayers with the incentives to support growth-oriented policies, which increase the future productivity of labor. We find that outcomes characterized by positive levels of intergenerational redistribution, public investment and long run growth can be sustained as subgame-perfect Nash equilibria of an infinitely repeated intergenerational game, if and only if the marginal productivity of public capital is large enough. Furthermore, we show that transfers comove with public investment and growth. (Copyright: Elsevier)

JEL-codes: E62 H55 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (37)

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Working Paper: Is Social Security Really Bad For Growth? (1995)
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DOI: 10.1006/redy.1998.0050

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