Pay-as-You-Go Social Security and the Distribution of Bequests

Universitat Pompeu Fabra Working Paper No. 468

36 Pages Posted: 11 Sep 2000

See all articles by Luisa Fuster

Luisa Fuster

University of Toronto - Department of Economics

Jordi Caballé

Autonomous University of Barcelona - Department of Economics and Economic History; Universitat Autonoma de Barcelona; Barcelona Graduate School of Economics (Barcelona GSE)

Date Written: February 2000

Abstract

This paper studies the impact of an unfunded social security system on the distribution of bequests in a framework where savings are due both by life cycle and by random altruistic motivations. We show that the impact of social security on the distribution of bequests depends crucially on the importance of the bequest motive in explaining savings behavior. If the bequest motive is strong, then an increase in the social security tax raises the bequests left by altruistic parents. On the other hand, when the importance of bequests in motivating savings is sufficiently low, the increase in the social security tax could result in a reduction of the bequests left by altruistic parents under some conditions on the attitude of individuals toward risk and on the relative returns associated with private saving and social security. Some implications concerning the transitional effects of introducing an unfunded social security scheme are also discussed.

Keywords: Social Security, Altruism, Bequests

JEL Classification: H55, D64, D31

Suggested Citation

Fuster, Luisa and Caballe Vilella, Jordi and Caballe Vilella, Jordi, Pay-as-You-Go Social Security and the Distribution of Bequests (February 2000). Universitat Pompeu Fabra Working Paper No. 468, Available at SSRN: https://ssrn.com/abstract=235460 or http://dx.doi.org/10.2139/ssrn.235460

Luisa Fuster (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada

Jordi Caballe Vilella

Autonomous University of Barcelona - Department of Economics and Economic History ( email )

Edifici B - Campus Bellaterra
Barcelona, 08193
Spain
34 - 93 - 581 32 64 (Fax)

Universitat Autonoma de Barcelona ( email )

Dept. d'Economia i Historia Economica
Edifici B
Bellaterra, Barcelona 08193
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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