On Sustainable Pay-as-You-Go Systems

35 Pages Posted: 27 Jul 2005

See all articles by Gabrielle Demange

Gabrielle Demange

Paris School of Economics (PSE); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: March 2005

Abstract

An unfunded Social Security system faces a major risk, sometimes referred to as 'political risk'. In order to account properly for this risk, the paper considers a political process in which the support to the system is asked from each newborn generation. The analysis is conducted in an overlapping generations economy that is subject to macroeconomic shocks. As a consequence, the political support varies with the evolution of the economy. The impact of various factors - intra-generational redistribution, risk aversion, financial markets, governmental debt - on the political sustainability of a pay-as-you-go system is discussed.

Keywords: Pay-as-you-go, intra-generational redistribution, overlapping generations, social security system, political economy, risk

JEL Classification: C72, C78

Suggested Citation

Demange, Gabrielle, On Sustainable Pay-as-You-Go Systems (March 2005). CEPR Discussion Paper No. 4966, Available at SSRN: https://ssrn.com/abstract=771490

Gabrielle Demange (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
22
Abstract Views
1,129
PlumX Metrics