Pareto improving social security reform when financial markets are incomplete!?

Dirk Krueger and Felix Kubler

No 2005/12, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: This paper studies an overlapping generations model with stochastic production and incomplete markets to assess whether the introduction of an unfunded social security system leads to a Pareto improvement. When returns to capital and wages are imperfectly correlated a system that endows retired households with claims to labor income enhances the sharing of aggregate risk between generations. Our quantitative analysis shows that, abstracting from the capital crowding-out effect, the introduction of social security represents a Pareto improving reform, even when the economy is dynamically effcient. However, the severity of the crowding-out effect in general equilibrium tends to overturn these gains.

Keywords: Social Security Reform; Aggregate Fluctuations; Intergenerational Risk Sharing; Incomplete Markets (search for similar items in EconPapers)
JEL-codes: D58 D91 E62 H31 H55 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/25454/1/515321494.PDF (application/pdf)

Related works:
Journal Article: Pareto-Improving Social Security Reform when Financial Markets are Incomplete!? (2006)
Working Paper: Pareto Improving Social Security Reform when Financial Markets Are Incomplete (2005)
Working Paper: Pareto Improving Social Security Reform when Financial Markets are Incomplete? (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200512

Access Statistics for this paper

More papers in CFS Working Paper Series from Center for Financial Studies (CFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().