This paper presents a dense summary of the most fundamental results on the issue of PAYG Social Security. They are presented in a simple and insightful analytical framework by working from the budget constraint of the household. The results presented in detail are a representation of the...

The public debt stock in some economically developed countries continues to increase because of a lack of tax revenues and the concomitant burdens of social security. Many of those countries suffer from lower birth rates and consequently, have fewer children. Child allowances might be an...

This paper analyzes the reform of the pensionable age as an answer to the future financing problems of public pension systems. We use a two-staged model where, first, the government decides the redistribution level of the pension system and, secondly, individuals face a voting process on the...

We examine the dynamic interaction of the population age structure, economic dependency, and fertility, paying particular attention to the role of intergenerational transfers. In the short run, a reduction in fertility produces a “demographic dividend” that allows for higher consumption. In...

We characterize pension systems along three dimensions: 1) actuarial vs. non-actuarial, 2) funded vs. pay-as-you-go, 3) defined-contribution vs. defined-benefit. Increasing the degree of actuarial fairness, by strengthening the linkage between contributions and benefits, reduces labor market...

The paper presents a model where public pensions are determined by majority voting. Voters differ by age and income. Moreover, life expectancy increases with income. Depending on the strength of the link between contributions and benefits, and the relationship between income and life expectancy,...

Options for reforming unfunded public pension schemes that are now being discussed all share the feature that the burden induced by demographic change would be shifted towards presently living and away from unborn generations. Existing models of the political economy of pension reform can not...

As one possible solution to the well-known financing crisis of unfunded social security systems, an increase in the retirement age is a popular option. To induce workers to retire later, it has been proposed to strengthen the link between retirement age and benefit level. The present paper is...

The traditional approach to flexible retirement (e.g. NDC) neglects the impact of asymmetric information on actuarial fairness (neutrality). The mechanism design approach (e.g. Diamond, 2003) gives up the requirement of neutrality and looks for a redistributive second-best benefit-retirement-age...

This paper analyses the effects of a pension system privatization in a unionized economy. Using an overlapping-generations framework we show that in an environment characterized by unemployment, a reform towards a private pension system in the steady state may result in lower levels of...