Hostname: page-component-76fb5796d-45l2p Total loading time: 0 Render date: 2024-04-25T23:39:50.217Z Has data issue: false hasContentIssue false
  • English
  • Français

OPTIMAL PAY-AS-YOU-GO SOCIAL SECURITY WITH ENDOGENOUS RETIREMENT

Published online by Cambridge University Press:  03 July 2017

Koichi Miyazaki
Koichi Miyazaki*
Affiliation:
Kagawa University
*
Address correspondence to: Koichi Miyazaki, Faculty of Economics, Kagawa University, 2-1, Saiwaicho, Takamatsu, Kagawa 7608523, Japan; e-mail: kmiyazaki@ec.kagawa-u.ac.jp.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper considers an overlapping-generations model with pay-as-you-go social security and retirement decision making by an old agent. In addition, this paper assumes that labor productivity depreciates. Under this setting, socially optimal allocations are examined. The first-best allocation is an allocation that maximizes welfare when a social planner distributes resources and forces an old agent to work and retire as she wants. The second-best allocation is one that maximizes welfare when a social planner can use only pay-as-you-go social security in a decentralized economy. This paper finds a range of an old agent's labor productivity such that the first-best allocation is achieved in a decentralized economy. This finding differs from that in Michel and Pestieau [“Social security and early retirement in an overlapping-generations growth model”, Annals of Economics & Finance, 2013], which notes that the first-best allocation cannot be achieved in a decentralized economy.

Keywords

Optimal Pay-As-You-Go Social SecurityEndogenous RetirementDepreciation of Labor ProductivityFirst-Best and Second-Best Allocation
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 2 , March 2019 , pp. 870 - 887
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I thank the editor and two anonymous referees of this journal, Been-Lon Chen, Hung-Ju Chen, Nan-Kuang Chen, Nobuhiro Hosoe, Shinsuke Ikeda, Masanori Kashiwagi, Ayako Kondo, Chih-Fang Lai, Yiting Li, Ryosuke Okamoto, Yi-Chan Tsai, and seminar participants at National Taiwan University, CEF 2015, and Policy Modeling Workshop at GRIPS for their helpful comments and suggestions, which helped the author a lot to improve this paper. The author acknowledges financial support from the Ministry of Science and Technology of Taiwan (Grant number:102-2410-H-002-020). Of course, all errors are the author's responsibility.

References

REFERENCES

Abel, Andrew B., Mankiw, Gregory M., Summers, Lawrence H., and Zeckhauser, Richard J. (1989) Assessing dynamic efficiency: Theory and evidence. Review of Economic Studies 56, 1–19.10.2307/2297746Google Scholar
Aísa, Rosa, Pueyo, Fernando, and Sanso, Marcos (2012) Life expectancy and labor supply of the elderly. Journal of Population Economics 25, 545–568.10.1007/s00148-011-0369-5Google Scholar
Diamond, Peter A. (1965) National debt in a neoclassical growth model. American Economic Review 55, 1126–1150.Google Scholar
Fenge, Robert and Pestieau, Pierre (2007) Social Security and Early Retirement. Cambridge, MA: MIT Press.Google Scholar
Gruber, Jonathan and Wise, David A. (1999) Social Security and Retirement Around the World. Chicago, IL: University of Chicago Press.Google Scholar
Hu, Sheng-Cheng (1979) Social security, the supply of labor, and capital accumulation. American Economic Review 69, 274–283.Google Scholar
Kitao, Sagiri (2014) Sustainable social security: Four options. Review of Economic Dynamics 17, 756–779.10.1016/j.red.2013.11.004Google Scholar
Michel, Philippe and Pestieau, Pierre (2013) Social security and early retirement in an overlapping-generations growth model. Annals of Economics & Finance 14, 705–719.Google Scholar
Miyazaki, Koichi (2014) The effects of the raising-the-official-pension-age policy in an overlapping generations economy. Economics Letters 123, 329–332.10.1016/j.econlet.2014.03.011Google Scholar
Miyazaki, Koichi (2015) Optimal Pay-As-You-Go Social Security with Endogenous Retirement. MPRA paper 68077.Google Scholar
Mizuno, Masakatsu and Yakita, Akira (2013) Elderly labor supply and fertility decisions in aging-population economies. Economics Letters 121, 395–399.10.1016/j.econlet.2013.09.022Google Scholar
Sala-i-Martin, Xavier X. (1996) A positive theory of social security. Journal of Economic Growth 1, 277–304.10.1007/BF00138865Google Scholar