Unfunded Pensions and Endogenous Labor Supply

28 Pages Posted: 11 Dec 2009

See all articles by Torben M. Andersen

Torben M. Andersen

University of Aarhus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Joydeep Bhattacharya

Iowa State University - Department of Economics

Date Written: December 8, 2009

Abstract

A classic result in dynamic public economics, dating back to Aaron (1966) and Samuelson (1975), states that there is no welfare rationale for PAYG pensions in a dynamically-efficient neoclassical economy with exogenous labor supply. This paper argues that this result, under the fairly-mild restriction that the old be no less risk-averse than the young, extends to a neoclassical economy with endogenous labor supply.

Keywords: pay-as-you-go, social security, endogenous labor supply, dynamic efficiency

JEL Classification: E6, H3

Suggested Citation

Andersen, Torben M. and Bhattacharya, Joydeep, Unfunded Pensions and Endogenous Labor Supply (December 8, 2009). Available at SSRN: https://ssrn.com/abstract=1520454 or http://dx.doi.org/10.2139/ssrn.1520454

Torben M. Andersen (Contact Author)

University of Aarhus - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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Joydeep Bhattacharya

Iowa State University - Department of Economics ( email )

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