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Social Security, the Golden Rule and the Optimal Allocation of Resources : the Case of Endogenous Retirement and a Strategic Bequest Motive

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  • Aylott, G

Abstract

Following the seminal work of Samuelson (1975), a theoretical literature has grown examining the macroeconomic relationship between social security, aggregate saving and the allocation of resources within an overlapping generations economy. One such paper by Hu (1979) suggests inter alia that a "pay-as-you-go" (PAYG) pension scheme cannot secure the optimal allocation of resources in the presence of either endogenous retirement or a bequest motive. This paper aims to extend the analysis of this issue, by showing that a suitably designed two tier PAYG pension scheme can in fact secure the first best outcome in the presence of endogenous retirement, provided either that no bequest motive is present, or that it takes the strategic form introduced by Bernheim et al.

Suggested Citation

  • Aylott, G, 1996. "Social Security, the Golden Rule and the Optimal Allocation of Resources : the Case of Endogenous Retirement and a Strategic Bequest Motive," The Warwick Economics Research Paper Series (TWERPS) 473, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:473
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/1995-1998/twerp473.pdf
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    Cited by:

    1. Hans Fehr & Wenche Irén Sterkeby & Øystein Thøgersen, 2003. "Social security reforms and early retirement," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(2), pages 345-361, May.

    More about this item

    Keywords

    RETIREMENT ; SOCIAL SECURITY ; OLD AGE BENEFITS;
    All these keywords.

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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