Generous early retirement provisions account for a large proportion of the drop in the labor force participation of elderly workers. The aim of this paper is to provide a positive theory of early retirement. We suggest that the political support for generous early retirement provisions relies...

When applying a differences-in-differences approach, equity returns and the equity premium are both estimated to be more than four percentage points higher after the introduction of a pay-as-you-go (PAYGO) system. In a realistically calibrated model, the PAYGO system is also found to increase...

Four options to make the social security sustainable under the coming demographic shift are presented; increase payroll taxes by 6 percentage points, reduce replacement rates by one-third, raise the normal retirement age to 73, or means-test the benefits and reduce them in income. The paper...

This paper studies the characteristics of intergenerational transfers in a standard overlapping generations model with short lived governments that care about the welfare of young generations only. A number of authors have shown that simple intergenerational games, in which in each period the...

The present paper simulates the privatization of social security in an economy populated by overlapping generations of individuals that have time-consistent or time-inconsistent preferences, face mortality and individual income risk as well as borrowing constraints. We compute the transition...

We study the effects of a social security reform in a large overlapping generations model where markets are incomplete and households face uninsurable idiosyncratic income shocks. We depart from the previous literature by assuming that, because of lack of commitment in the credit market, the...

This paper quantifies the effects of social security on capital accumulation and wealth distribution in a life-cycle framework with altruistic individuals. The main findings of this paper are that the current U.S. social security system has a significant impact on capital accumulation and wealth...

This paper reviews the long-term financial problems facing the U.S. Social Security system. Not only is the system out of long-term actuarial balance, but implicit rates of return on worker contributions are low and dropping. The paper discusses different approaches for dealing with the twin...

I develop a general equilibrium model in which the quality of household financial decisions is endogenously determined by the incentives to exert effort in learning about financial opportunities. The model generates predictions for asset market participation and returns across households....

This paper incorporates two features of housing in a life-cycle analysis of social security: housing as a durable good and housing market frictions. We find that both housing quantities and homeownership rates respond strongly to eliminating social security. Accordingly, the aggregate impacts of...