Social security systems in most industrialized countries face severe financial problems due to adverse demographic changes. The increase in old-age dependency, however, will be spread over a period of approximately 50 years. The degree of technological progress necessary to offset the negative...

In a stochastic economy with overlapping generations, fiscal policy affects the allocation of aggregate risks. The paper shows how to compute the welfare effects of marginal policy changes that shift risk across cohorts, in general and for an application to social security equity investments. I...