We construct a general equilibrium model in which a pay-as-you-go social security system can be adopted and sustained as a political and economic equilibrium. We analyze the welfare implications of this system and compare general equilibrium welfare measures to the commonly used notion of...

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...