IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/68077.html
   My bibliography  Save this paper

Optimal pay-as-you-go social security with endogenous retirement

Author

Listed:
  • Miyazaki, Koichi

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, the 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 an allocation that maximizes welfare when she can use only pay-as-you-go social security in a decentralized economy. The paper finds a range of an old agent’s labor productivity such that the first-best allocation is achieved in the decentralized economy. This differs from the finding in Micheland Pestieau [“Social security and early retirement in an overlapping-generations growth model”, Annals of Economics & Finance, 2013] that the first-best allocation cannot be achieved in the decentralized economy.

Suggested Citation

  • Miyazaki, Koichi, 2015. "Optimal pay-as-you-go social security with endogenous retirement," MPRA Paper 68077, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68077
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/68077/2/MPRA_paper_68077.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philippe Michel & Pierre Pestieau, 2013. "Social Security And Early Retirement In An Overlapping-Generations Growth Model," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 723-737, November.
    2. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1989. "Assessing Dynamic Efficiency: Theory and Evidence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(1), pages 1-19.
    3. Jonathan Gruber & David A. Wise, 1999. "Introduction to "Social Security and Retirement around the World"," NBER Chapters, in: Social Security and Retirement around the World, pages 1-35, National Bureau of Economic Research, Inc.
    4. Chattopadhyay, Subir, 2006. "Optimality in stochastic OLG models: Theory for tests," Journal of Economic Theory, Elsevier, vol. 131(1), pages 282-294, November.
    5. Sagiri Kitao, 2014. "Sustainable Social Security: Four Options," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 756-779, October.
    6. Rosa Aísa & Fernando Pueyo & Marcos Sanso, 2012. "Life expectancy and labor supply of the elderly," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 545-568, January.
    7. Barbie, Martin & Hagedorn, Marcus & Kaul, Ashok, 2007. "On the interaction between risk sharing and capital accumulation in a stochastic OLG model with production," Journal of Economic Theory, Elsevier, vol. 137(1), pages 568-579, November.
    8. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1.
    9. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-283, June.
    10. Sala-i-Martin, Xavier X, 1996. "A Positive Theory of Social Security," Journal of Economic Growth, Springer, vol. 1(2), pages 277-304, June.
    11. Mizuno, Masakatsu & Yakita, Akira, 2013. "Elderly labor supply and fertility decisions in aging-population economies," Economics Letters, Elsevier, vol. 121(3), pages 395-399.
    12. Miyazaki, Koichi, 2014. "The effects of the raising-the-official-pension-age policy in an overlapping generations economy," Economics Letters, Elsevier, vol. 123(3), pages 329-332.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen Hung-Ju & Miyazaki Koichi, 2022. "Pay-as-You-Go Social Security and Educational Subsidy in an Overlapping Generations Model with Endogenous Fertility and Endogenous Retirement," The B.E. Journal of Macroeconomics, De Gruyter, vol. 22(2), pages 787-820, June.
    2. Jaimes, Richard & Westerhout, Ed, 2023. "Optimal policies in an ageing society," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    3. Hirono, Makoto & Mino, Kazuo, 2019. "Pension, Retirement, and Growth in the Presence Heterogeneous Elderly," MPRA Paper 98096, University Library of Munich, Germany.
    4. Cipriani, Giam Pietro & Fioroni, Tamara, 2022. "Social security and endogenous demographic change: child support and retirement policies," Journal of Pension Economics and Finance, Cambridge University Press, vol. 21(3), pages 307-325, July.
    5. Hung-ju Chen & Koichi Miyazaki, 2020. "Labor productivity, labor supply of the old, and economic growth," Economics Bulletin, AccessEcon, vol. 40(1), pages 277-285.
    6. Chen Hung-Ju & Miyazaki Koichi, 2018. "Fertility and labor supply of the old with pay-as-you-go pension and child allowances," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(1), pages 1-19, January.
    7. Chen, Hung-Ju, 2016. "Fertility, Retirement Age, and PAYG Pensions," MPRA Paper 69819, University Library of Munich, Germany.
    8. Nguyen, Quynh-Nga, 2024. "Intergenerational time transfer, retirement and public pensions," The Journal of the Economics of Ageing, Elsevier, vol. 27(C).
    9. Hirono, Makoto & Mino, Kazuo, 2020. "Pension Reforms, Population Aging, and Retirement Decision of the Elderly in a Neoclassical Growth Model," MPRA Paper 102467, University Library of Munich, Germany.
    10. Cipriani, Giam Pietro & Fioroni, Tamara, 2024. "Human capital and pensions with endogenous fertility and retirement," Macroeconomic Dynamics, Cambridge University Press, vol. 28(2), pages 478-494, March.
    11. Tran, Quang-Thanh, 2022. "The aging tax on potential growth in Asia," Journal of Asian Economics, Elsevier, vol. 81(C).
    12. Chen, Hung-Ju, 2015. "Fertility and PAYG Pensions in an Overlapping Generations Model with Endogenous Retirement," MPRA Paper 68020, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hirono, Makoto & Mino, Kazuo, 2019. "Pension, Retirement, and Growth in the Presence Heterogeneous Elderly," MPRA Paper 98096, University Library of Munich, Germany.
    2. Hirono, Makoto & Mino, Kazuo, 2020. "Pension Reforms, Population Aging, and Retirement Decision of the Elderly in a Neoclassical Growth Model," MPRA Paper 102467, University Library of Munich, Germany.
    3. Betti, Thierry & Lefebvre, Mathieu & Pestieau, Pierre, 2023. "Macroeconomics of aging," LIDAM Discussion Papers CORE 2023002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Jaimes, Richard & Westerhout, Ed, 2023. "Optimal policies in an ageing society," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    5. Gilles Le Garrec & Stéphane Lhuissier, 2011. "Life expectancy, heavy work and the return to education: lessons for the social security reform," SciencePo Working papers Main hal-01069511, HAL.
    6. Jaimes, Richard & Westerhout, Ed, 2023. "Optimal policies in an ageing society," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    7. Cipriani, Giam Pietro & Fioroni, Tamara, 2024. "Human capital and pensions with endogenous fertility and retirement," Macroeconomic Dynamics, Cambridge University Press, vol. 28(2), pages 478-494, March.
    8. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, "undated". "The Evolution of Retirement," Working Papers 2005-03, FEDEA.
    9. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, 2005. "Early Retirement and Social Security: A Long Term Perspective," CESifo Working Paper Series 1571, CESifo.
    10. de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Aging and pensions in general equilibrium: Labor market imperfections matter," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 104-124.
    11. Tran, Quang-Thanh, 2022. "The aging tax on potential growth in Asia," Journal of Asian Economics, Elsevier, vol. 81(C).
    12. Vincenzo Galasso, 2012. "The Political Feasibility of Postponing Retirement," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(4), pages 27-31, December.
    13. Chen, Hung-Ju, 2016. "Fertility, Retirement Age, and PAYG Pensions," MPRA Paper 69819, University Library of Munich, Germany.
    14. Cipriani, Giam Pietro & Pascucci, Francesco, 2020. "Pension policies in a model with endogenous fertility," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(1), pages 109-125, January.
    15. Cooley, Thomas F. & Henriksen, Espen & Nusbaum, Charlie, 2024. "Demographic obstacles to European growth," European Economic Review, Elsevier, vol. 169(C).
    16. Glomm, Gerhard & Jung, Juergen & Tran, Chung, 2009. "Macroeconomic implications of early retirement in the public sector: The case of Brazil," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 777-797, April.
    17. Georges Casamatta & L. Batté, 2016. "The Political Economy of Population Aging," Post-Print hal-02520521, HAL.
    18. Casamatta, G. & Batté, L., 2016. "The Political Economy of Population Aging," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 381-444, Elsevier.
    19. Yusuke Miyake & Masaya Yasuoka, 2018. "Subsidy Policy and Elderly Labor," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(2), pages 331-347, July.
    20. Kiminori Matsuyama, 2008. "A One‐Sector Neoclassical Growth Model With Endogenous Retirement," The Japanese Economic Review, Japanese Economic Association, vol. 59(2), pages 139-155, June.

    More about this item

    Keywords

    Overlapping-generations model; pay-as-you-go social security; endogenous retirement; depreciation of labor productivity; first-best allocation; second-best allocation;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:68077. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.