IDIOSYNCRATIC RISK, AGGREGATE RISK, AND THE WELFARE EFFECTS OF SOCIAL SECURITY
Daniel Harenberg and
Alexander Ludwig ()
International Economic Review, 2019, vol. 60, issue 2, 661-692
We ask whether a pay‐as‐you‐go financed social security system is welfare improving in an economy with idiosyncratic and aggregate risk. We show that the whole welfare benefit from insurance against both risks is greater than the sum of benefits from insurance against the isolated risks. One reason is the convexity of the welfare gain. The other reason is a direct risk interaction amplifying the utility losses from risk. Our quantitative evaluation shows that introducing a minimum pension leads to sizeable welfare gains, despite substantial crowding out. About 60% of these gains would be missing from summing up the isolated benefits.
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Working Paper: Idiosyncratic risk, aggregate risk, and the welfare effects of social security (2018)
Working Paper: Idiosyncratic risk, aggregate risk, and the welfare effects of social security (2017)
Working Paper: Idiosyncratic Risk, Aggregate Risk, and the Welfare Effects of Social Security (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wly:iecrev:v:60:y:2019:i:2:p:661-692
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598
Access Statistics for this article
International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger
More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().