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Social insurance for the elderly

Author

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  • Bae, Se Yung
  • Jeon, Junkee
  • Koo, Hyeng Keun
  • Park, Kyunghyun

Abstract

We study the effects of retirement benefits provided by social insurance programs on consumption, portfolio choice, and retirement in a continuous-time theoretical model. We show that people tend to retire earlier with an increase in retirement social insurance benefits (SIBs), consistent with empirical evidence. We show also that people tend to increase savings before retirement in anticipation of increased retirement benefits, a counter-intuitive result. The response of risky investment with an increase in the SIBs is ambiguous, depending on parameter values. The overall social welfare will increase with an increase in SIBs if the balanced budget constraint is satisfied. We also investigate the effects of changes in the two streams of the SIBs (paid in perishable goods and cash) and the proportion of workers in entire population on social welfare.

Suggested Citation

  • Bae, Se Yung & Jeon, Junkee & Koo, Hyeng Keun & Park, Kyunghyun, 2020. "Social insurance for the elderly," Economic Modelling, Elsevier, vol. 91(C), pages 274-299.
    • Handle: RePEc:eee:ecmode:v:91:y:2020:i:c:p:274-299
    DOI: 10.1016/j.econmod.2020.05.021
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    More about this item

    Keywords

    Social insurance; Consumption; Investment; Retirement; Social welfare;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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