An Analysis of Pay As You Go Pension Systems as Dynastic Clubs
1991 (English)Report (Other academic)
The paper analyzes intergenerational welfare effects of a stylized PAYG pension system. It builds on and extends the recent development of the theory of gifts and bequests between altruistic members of the same dynasty. The new feature is a system of clubs that transfer resources from young to old. Equilibria with clubs are proved to be time-consistent under certain parameter values, where set up costs and altruism play essential roles. Clubs remove a market failure in more traditional intertemporal equilibria. They also extend the region where positive transfers occur. The effects on growth are evaluated in terms of the life cycle welfare for members of the dynasty. In most cases these effects represent Pareto improvements. Further results are that club equilibria will obey the rules of Ricardian equivalence and that the conditions for capital overaccumulation are narrowed substantially.
Place, publisher, year, edition, pages
Stockholm: IIES , 1991. , 23 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 497
IdentifiersURN: urn:nbn:se:su:diva-41806OAI: oai:DiVA.org:su-41806DiVA: diva2:337797
Published in connection with a visit at the IIES.2010-08-092010-08-092010-08-09