In this paper we investigate why and to what extent the government should have a social security trust fund, and how it should manage the fund in the face of demographic shocks, based on a simple overlapping-generations model. We show that the government should have a trust fund in some form,...

Social security tends to be unsustainable in nature in that it reduces individuals' demand for children as a measure to support their old age, which in turn undermines the financial base of social security. Using a simple overlapping-generations model with endogenous fertility and income...