Social Security Reform with Heterogeneous Agents

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Social Security Reform with Heterogeneous Agents

Author Info

Juan C. Conesa (Universidad de Barcelona and University of Minnesota)
Dirk Krueger (University of Minneapolis and Federal Reserve Bank of Minneapolis)

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Abstract

This paper analyzes the quantitative role of idiosyncratic uncertainty in an economy in which rational agents vote on hypothetical social security reforms. We find that the role of a pay-as-you-go social security system as a partial insurance and redistribution device significantly reduces political support for a transition to an economy with a fully funded system. We conclude that the status quo bias in favor of an unfunded social security system is stronger in economies in which agents of similar age differ significantly with respect to labor earnings and wealth due to idiosyncratic income uncertainty. (Copyright: Elsevier)

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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 2 (1999)
Issue (Month): 4 (October)
Pages: 757-795
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Handle: RePEc:red:issued:v:2:y:1999:i:4:p:757-795

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Butler, Monika, 1999. "Anticipation effects of looming public-pension reforms," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 119-159, June. [Downloadable!] (restricted)
Harold L. Cole & Narayana R. Kocherlakota, 1999. "Efficient allocations with hidden income and hidden storage," Staff Report 238, Federal Reserve Bank of Minneapolis. [Downloadable!]
Other versions:
- Cole, Harold L & Kocherlakota, Narayana R, 2001. "Efficient Allocations with Hidden Income and Hidden Storage," Review of Economic Studies, Blackwell Publishing, vol. 68(3), pages 523-42, July.
Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February. [Downloadable!] (restricted)
Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March. [Downloadable!]
Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December. [Downloadable!] (restricted)
Tauchen, George & Hussey, Robert, 1991. "Quadrature-Based Methods for Obtaining Approximate Solutions to Nonlinear Asset Pricing Models," Econometrica, Econometric Society, vol. 59(2), pages 371-96, March. [Downloadable!] (restricted)
Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October. [Downloadable!] (restricted)
Other versions:
- Per Krusell & Anthony A. Smith, Jr., . "Income and Wealth Heterogeneity in the Macroeconomy," GSIA Working Papers 1997-37, Carnegie Mellon University, Tepper School of Business.
- Krusell, P & Smith Jr, A-A, 1995. "Income and Wealth Heterogeneity in the Macroeconomic," RCER Working Papers 399, University of Rochester - Center for Economic Research (RCER).
Bohn, Henning, 1999. "Will social security and Medicare remain viable as the U.S. population is aging?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 1-53, June. [Downloadable!] (restricted)
Heathcote, Jonathan, 2001. "Fiscal Policy with Heterogeneous Agents and Incomplete Markets," Working Papers 01-03, Duke University, Department of Economics. [Downloadable!]
Other versions:
- Heathcote, Jonathan, 1999. "Fiscal Policy with Heterogeneous Agents and Incomplete Markets," Working Paper Series in Economics and Finance 319, Stockholm School of Economics, revised 28 Jul 1999. [Downloadable!]
- Jonathan Heathcote, 2003. "Fiscal Policy with Heterogeneous Agents and Incomplete Markets," Working Papers gueconwpa~03-03-23, Georgetown University, Department of Economics. [Downloadable!]
- Jonathan Heathcote, 2005. "Fiscal Policy with Heterogeneous Agents and Incomplete Markets," Review of Economic Studies, Blackwell Publishing, vol. 72(1), pages 161-188, 01. [Downloadable!] (restricted)
repec:cup:macdyn:v:1:y:1997:i:1:p:7-44 is not listed on IDEAS
Aiyagari, S Rao, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 659-84, August. [Downloadable!] (restricted)
Other versions:
- S. Rao Aiyagari, 1993. "Uninsured idiosyncratic risk and aggregate saving," Working Papers 502, Federal Reserve Bank of Minneapolis. [Downloadable!]
Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1995. "A Life Cycle Analysis of Social Security," Economic Theory, Springer, vol. 6(1), pages 83-114, June.

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