"Should I Pay for You or for Myself?" The Optimal Level and Composition of Retirement Benefit Systems
Bernard van Praag () and
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Pedro Cardoso: European Commission, Directorate Employment, Social Affairs and Inclusion
No 249, IZA Discussion Papers from Institute of Labor Economics (IZA)
Feldstein  posed the questions of what would be the optimal level of retirement benefit, and what would be the optimal mix between the pay-as-you-go system and the funded pension system under the assumption of an exogenous interest rate. We reconsider the problem with the addition of a flexible production function and, consequently, an endogenous interest rate. Moreover, we allow the contributions rate è to be negative as well. In the case of a negative è , the retired subsidize the workers out of their saved capital. This case turns out to be the optimal one in situations of low population growth.
Keywords: welfare systems; retirement benefits; funded pensions; pay-as-you-go systems; Social security (search for similar items in EconPapers)
JEL-codes: D91 E21 H55 J14 J26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab, nep-pbe and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp249
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