We examine forecast accuracy and efficiency of the Social Security Administration’s projections for cost rate, trust fund balance, trust fund ratio made during 1980-2020 with horizons up to 95 years. We find that the reported deterioration in the accuracy of the forecasts during 2010’s has...

Pay-as-you-go (PAYG) social security schemes in the OECD countries are facing solvency problems, as people are living longer and birth rates have declined. Postponing the full retirement age (FRA), when retirees are entitled to full pension, has been proposed as a solution. This effectively...

We model the optimal reaction of a public PAYG pension system to demographic shocks. We compare the ex-ante first best and second best solution of a Ramsey planner with full commitment to the outcome under simple third best rules that mimic the pension systems observed in the real world. The...

In this paper we identify conditions under which the introduction of a pay-as-you-go social security system is ex-ante Pareto-improving in a stochastic overlapping generations economy with capital accumulation and land. We argue that these conditions are consistent with many calibrations of the...

The labor market effects of pension reform stem from retirement behavior and from job search and hours worked of prime age workers. This paper investigates the impact of four often proposed policy measures for sustainable pensions: strengthening the tax benefit link, moving from wage to price...

Continuous longevity improvements and population ageing have led countries to modify national public pension schemes by increasing the standard and early retirement ages in a discretionary, scheduled, or automatic way, and by making it harder for people to retire prematurely. To this end,...

This paper analyzes the sustainability of intergenerational transfers in politico-economic equilibrium. Embedding electoral competition for the votes of old and young households in the standard Diamond (1965) OLG model, we find that intergenerational transfers naturally arise in a Markov perfect...

Using an overlapping generations model, two new indicators of public pension system sustainability are proposed: the pension space, which measures the capacity to pay for pension expenditures out of labour taxation, and the pension space exhaustion probability reflecting demographic...

This paper provides a unified treatment of externalities associated with fertility and human capital accumulation as they relate to pension systems. It considers as overlapping generations model in which every generation consists of high earners and low earners with the proportion of types being...

We extend economic equivalence results, like the Ricardian equivalence proposition, to the political sphere where policy is chosen sequentially. We derive conditions under which a policy regime (summarizing admissible policy choices in every period) and a state are politico-economically...