Unfunded Pensions and Endogenous Labor Supply
28 Pages Posted: 11 Dec 2009
Date Written: December 8, 2009
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: Suggested Citation