Electronic Resource
Berkeley, Calif.
:
Berkeley Electronic Press (now: De Gruyter)
The @B.E. journal of macroeconomics
7.2007, 1, art29
ISSN:
1555-0486
Source:
Berkeley Electronic Press Academic Journals
Topics:
Economics
Notes:
Cooley and Soares (1999) show that a pay-as-you-go (unfunded) pension system can be an outcome of a political equilibrium even without intergenerational altruism. This note assumes an endogenous growth model rather than an exogenous one. This assumption establishes a link between the savings rate and economic growth. Since the introduction of a pay-as-you-go system lowers the savings rate, it has an adverse effect on the growth rate and hence on the future interest rate and future pensions. When this additional incentive is taken into account, the level of the pay-as-you-go system chosen in political equilibrium can be lower or even, depending on calibration values, disappear entirely, relative to the exogenous growth model of Cooley and Soares.
Type of Medium:
Electronic Resource
URL:
http://www.bepress.com/bejm/vol7/iss1/art29
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