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Title:Pareto improving social security reform when financial markets are incomplete!? PDF Logo
Authors:Krueger, Dirk
Kubler, Felix
Issue Date:2005
Series/Report no.:CFS Working Paper 2005/12
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.
Subjects:Social Security Reform
Aggregate Fluctuations
Intergenerational Risk Sharing
Incomplete Markets
JEL:E62
H55
H31
D91
D58
Persistent Identifier of the first edition:urn:nbn:de:hebis:30-10881
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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