This paper examines the risk aspects of a fully phased-in investment-based defined contribution Social Security plan. Individuals save a fraction of wages in a Personal Retirement Account (PRA) invested in a 60:40 equity-debt mix and receive a similarly invested variable annuity from age 67. The...

This paper studies the macroeconomic and efficiency effects of privatizing social security. It does so by simulating alternative privatization schemes using the Auerbach-Kotlikoff Dynamic Life-Cycle Model. The simulations indicate three things. First, privatizing social security can generate...

We evaluate several actual and hypothetical sustainable PAYGO pension structures, including: (1) versions of the US Social Security system with annual adjustments of taxes or benefits to maintain fiscal balance; (2) Sweden's Notional Defined Contribution system and several variants developed to...

The data show that an increase in government provided old-age pensions is strongly correlated with a reduction in fertility. What type of model is consistent with this finding? We explore this question using two models of fertility, the one by Barro and Becker (1989), and the one inspired by...

In this paper, we argue that in designing government debt and tax-transfer policies, it is important to consider their implications for the allocation of risk between generations. There is no reason to presume that the market or the family can allocate risk efficiently to future generations,...

Is there an economic rationale for pronatalist policies? In this paper we propose and analyze a particular market failure that may lead to inefficiently low equilibrium fertility and therefore to a need for government intervention. The friction we investigate is related to the ownership of...

This paper examines the optimal allocation of risk in an overlapping-generations economy. It compares the allocation of risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian 'veil of ignorance' could share risk with one another through...

In a static setup, migration of unskilled labor may be resisted by the entire native-born population because, being relatively low earners, migrants are net beneficiaries of the fiscal system. However, the paper shows that with a pay-as-you-go pension, an important pillar of the welfare state,...

Migration has important implications for the financial soundness of the pension system, which is an important pillar of the welfare state. While it is common sense to expect that young migrants, even if low-skilled, can help society pay the benefits to the currently elderly, it may nevertheless...

The social security program now provides a constant real benefit throughout each retirees lifetime. This paper examines whether total welfare would rise if benefits were lower in early retirement years (when most individuals have some saving with which to finance consumption) and higher in later...