We examine the optimal policy response to an exogenously given demographic shock. Such a shock affects negatively the financing of retirement pensions, and we use optimal fiscal policy in order to determine the optimal strategy of the social security administration. Our approach provides...

In this paper we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks, where households also differ permanently with respect to their ability to generate income. The welfare criterion we employ is...

In this paper we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks, where households also differ permanently with respect to their ability to generate income. The welfare criterion we employ is...

The quantitative literature has documented that a privatization of the social security system generates large long-run welfare gains at the cost of welfare losses for transition generations. In this article, we maximize over the entire policy space, following the optimal fiscal policy approach....

The choice of the intertemporal discount rate affects the measurement of the tax burden of different age cohorts. Small changes in the discount rate affect not only the magnitude of the measured changes, but also the ranking of policies using that metric. The authors illustrate this problem in...

This paper uses a overlapping generation general equilibrium model to study a reform of the social security system, going from an unfunded to a funded system. We also analyze the effects of this reform on the incentives of young generations to acquire skills. the main objective is to evaluate...