"Should i pay for you or for myself?": the optimal level and composition of retirement benefit systems
Feldstein  posed the questions of what would be the optimal level of retirement benefit, and what would be the optimal mix between the pay-as-you-go system and the funded pension system under the assumption of an exogenous interest rate. We reconsider the problem with the addition of a flexible production function and, consequently, an endogenous interest rate. Moreover, we allow the contributions rate O to be negative as well. In the case of a negative O, the retired subsidize the workers out of their saved capital. This case turns out to be the optimal one in situations of low population growth.
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4a Period 5on Ratio active effective labor Analysis assume capital intensity capital productivity Cobb-Douglas Cobb-Douglas production function Composition of Retirement consumption countries dependency ratio Dustmann effect of changes effective labor population effective labor unit elderly equation 19 Eurostat exogenous Feldstein 1985 funded system Gong implies increase individual savings interest rate inverse social security inverse system IZA Discussion Papers K. F. Zimmermann labor economics labor income Labor Market Level and Composition lifetime utility Migration number of effective old-age pension Oldv 5oung optimal capital stock Optimal Level optimal savings optimal social security optimal tax rate Panel Data Pay-As-You-Go System pay-roll contributions rate pay-roll tax PAYG system pension system population growth rate preference rate Production per effective rate g Retirement Benefit Systems situation Social Security Contributions social security system Soest subsidies technological growth transfers unconstrained Unemployment University of Amsterdam utility function various parameters values Welfare workers pay