The paper investigates the impacts of demographic change on the financial sustainability of a pay-as-you-go social security system in an economy with unemployment caused by trade unions. Using a simple two-period overlapping generations approach, it can be shown that the trade union behavior...

In this model of education, where individuals are exposed both to educational risk and to wage risk within the skilled sector, successful graduation depends both on individual effort to study and on public resources. We show that insuring the present risks is a dichotomic task: Wage risk is...

This paper analyzes the welfare effects of the Italian social security system in an economy with uncertainty on wages, financial market returns and life expectancy. The introduction of a pension system reproducing the Italian statutory scheme turns out to decrease ex-ante individual welfare,...

We study the welfare effects of earnings testing flat-rate old-age benefits in a quantitative overlapping generations model with idiosyncratic labor income risk. In our model economy, even a moderate earnings testing reduces individuals' expected lifetime utility, whenever other taxes are taken...

We study optimal nonlinear income taxation when earnings can differ because of both ability and luck, so the income tax has both a redistributive role and an insurance role. A substantial literature on optimal redistribution in the absence of uncertainty has evolved since Mirrlees' original...

Government spending on the elderly is projected to increase rapidly as the American population becomes older. As a result, many policymakers and budget analysts are concerned about the continued viability of entitlement programs such as Social Security. The Social Security trustees' economic...