Evaluating pay-as-you-go social security systems

Bachmann, Andreas; Wüthrich, Kaspar (November 2013). Evaluating pay-as-you-go social security systems (Discussion Papers 13-10). Bern: Department of Economics

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This paper proposes a new method for welfare analysis of unfunded social security systems. Based on an overlapping generations model with endogenous labor supply, we derive a formula for the evaluation of existing pay-as-you-go social security systems that depends on impulse response functions and projected growth rates only. We propose an implementation strategy based on reduced form estimates of a VAR model that is valid under weak assumptions about the deep structure of the model. Our method is related to the sufficient statistic approach (Chetty, 2009). For the current system in the United States, we find that a transitory increase in the payroll tax rate along with higher pension benefits leads to a welfare increase mainly due to welfare gains of today’s retirees. A scenario analysis demonstrates the robustness of this result.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Bachmann, Andreas and Wüthrich, Kaspar

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

28 Oct 2020 17:13

Last Modified:

28 Oct 2020 17:13

JEL Classification:

E62, H55

BORIS DOI:

10.7892/boris.145775

URI:

https://boris.unibe.ch/id/eprint/145775

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