We develop a general equilibrium stochastic OLG model with heterogenous households. Households differ with respect to their productivity. Productivity depends stochastically on parents' unobservable investment in their child's human capital and an aggregate productivity shock. We introduce a...

This paper examines the impact of social security on welfare. The provision of social security reduces precautionary savings and encourages early retirement. Consequently, it lowers aggregate capital, employment, output, and consumption. On the other hand, it also provides old age insurance....

One decade ago the formerly socialist, east-European economies collapsed. They are facing the diffcult and complex task to transform and to modernize their economic structures. In the beginning, many economists believed that the process of transition could be done fast and easily....