We examine the optimal policy response to an exogenously given demographic shock. Such a shock affects negatively the financing of retirement pensions, and we use optimal fiscal policy in order to determine the optimal strategy of the social security administration. Our approach provides...

We argue that a privatization of the social security system, going from a Pay-As-You-Go to a Fully Funded system, can be interpreted as the explicit recognition of an implicit debt and there is no efficiency gain in doing so. As a consequence, potential efficiency gains upon reforming the system...

In this paper we show that the generational accounting framework used in macroeconomics to measure tax incidence can, in some cases, yield inaccurate measurements of the tax burden across age cohorts. This result is very important for policy evaluation, because it shows that the selection of tax...