Unfunded pensions and endogenous labor supply

Date
2012-02-10
Authors
Andersen, Torben
Bhattacharya, Joydeep
Bhattacharya, Joydeep
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Economics
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Economics
Abstract

A classic result in dynamic public economics states that there is no welfare rationale for pay-as-you-go (PAYG) pensions in a dynamically-efficient neoclassical economy with exogenous labor supply. Parenthetically, a welfare justification for PAYG pensions exists if the economy is dynamically inefficient. Under a sufficient condition that the old be no less risk-averse than the young, these results extend to an economy with endogenous labor supply.

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