Social Security, the Golden Rule and the Optimal Allocation of Resources: the Case of Endogenous Retirement and a Strategic Bequest Motive

G Aylott

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Following the seminal work of Samuelson (1975), a theoretical literature has grown examining the macroeconomic relationship between social security, aggregate saving and the allocation of resources within an overlapping generations economy. One such paper by Hu (1979) suggests inter alia that a "pay-as-you-go" (PAYG) pension scheme cannot secure the optimal allocation of resources in the presence of either endogenous retirement or a bequest motive. This paper aims to extend the analysis of this issue, by showing that a suitably designed two tier PAYG pension scheme can in fact secure the first best outcome in the presence of endogenous retirement, provided either that no bequest motive is present, or that it takes the strategic form introduced by Bernheim et al.

Keywords: RETIREMENT; SOCIAL SECURITY; OLD AGE BENEFITS (search for similar items in EconPapers)
JEL-codes: H55 J26 (search for similar items in EconPapers)
Pages: 14 pages
Date: 1996
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:473

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