Dynamic Efficiency and Pareto Optimality in a Stochastic OLG Model with Production and Social Security
We analyze the interaction between risk sharing and capital accumulation in a stochastic OLG model with production. We give a complete characterization of interim Pareto optimality. Our characterization also subsumes equilibria with a PAYG social security system. In a competitive equilibrium interim Pareto optimality is equivalent to intergenerational exchange efficiency, which in turn implies dynamic efficiency. Furthermore, contrary to the case of certainty, dynamic effi-ciency does not rule out a Pareto-improving role for a social security system. Social security can provide insurance against macroeconomic risk, namely aggregate productivity risk in the second period of life (old age) through dynamic risk sharing. The mechanism through which social security can Pareto-improve market allocations resembles a Ponzi scheme. But instead of rolling over debt, we can interpret our scheme as one that raises contributions and then rolls over an insurance contract
Year of publication: |
[2021]
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Authors: | Kaul, Ashok ; Barbie, Martin ; Hagedorn, Marcus |
Publisher: |
[S.l.] : SSRN |
Subject: | Overlapping Generations | Overlapping generations | Pareto-Optimum | Pareto efficiency | Theorie | Theory | Soziale Sicherheit | Social security | Stochastischer Prozess | Stochastic process | Finanzierung der Sozialversicherung | Social security financing | Allokationseffizienz | Allocative efficiency | Dynamisches Gleichgewicht | Dynamic equilibrium | Investition | Investment |
Saved in:
freely available
Extent: | 1 Online-Ressource (41 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 2000 erstellt |
Other identifiers: | 10.2139/ssrn.252015 [DOI] |
Classification: | D61 - Allocative Efficiency; Cost-Benefit Analysis ; H55 - Social Security and Public Pensions |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10013321226