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Optimal pay-as-you-go social security with endogenous retirement

Koichi Miyazaki

MPRA Paper from University Library of Munich, Germany

Abstract: This paper considers an overlapping-generations model with pay-as-you-go social security and retirement decision making by an old agent. In addition, the paper assumes that labor productivity depreciates. Under this setting, socially optimal allocations are examined. The first-best allocation is an allocation that maximizes welfare when a social planner distributes resources and forces an old agent to work and retire as she wants. The second-best allocation is an allocation that maximizes welfare when she can use only pay-as-you-go social security in a decentralized economy. The paper finds a range of an old agent’s labor productivity such that the first-best allocation is achieved in the decentralized economy. This differs from the finding in Micheland Pestieau [“Social security and early retirement in an overlapping-generations growth model”, Annals of Economics & Finance, 2013] that the first-best allocation cannot be achieved in the decentralized economy.

Keywords: Overlapping-generations model; pay-as-you-go social security; endogenous retirement; depreciation of labor productivity; first-best allocation; second-best allocation (search for similar items in EconPapers)
JEL-codes: D91 H21 H55 J26 (search for similar items in EconPapers)
Date: 2015-07-02
New Economics Papers: this item is included in nep-age, nep-dge and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: OPTIMAL PAY-AS-YOU-GO SOCIAL SECURITY WITH ENDOGENOUS RETIREMENT (2019) Downloads
Working Paper: Optimal pay-as-you-go social security when retirement is endogenous and labor productivity depreciates (2014) Downloads
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