Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/173130 
Year of Publication: 
2018
Series/Report no.: 
Economics Discussion Papers No. 2018-5
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
The purpose of this study is to explore the effects of exogenous social security system parameters on welfare. The set up is an overlapping generations economy, with skills heterogeneity, which distinguishes consumers between high and low skilled. The lowskilled receive an extra supplement pension. The social security system has three exogenous parameters: the benefits, the contributions, and the funding parameter. The author examines and compares the effects of these three exogenous social security parameters, first under inelastic and then under elastic labor supply, on individuals welfare. He finds that when labor supply is inelastic, the parameters affect differently the welfare of the high and the low-skilled, since for the latter, we must also take into account the indirect effects through the supplement pension provision. When labor supply is elastic, the effects of changes in the social security parameters on welfare are the same for both the high and the low skilled, as in the case of inelastic labor supply.
Subjects: 
social security
pensions
PAYGO
funded systems
welfare
skills heterogeneity
JEL: 
D11
E21
H55
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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