Abstract
In this paper, we develop a two-period overlapping generations model with two types of individuals, life-cyclers and myopes. We revisit Feldstein's problem by deriving the optimal level of social security using a social welfare function à la Samuelson (rather than à la Lerner). In opposition to the Lerner solution, our optimal pension benefit exhibits several interesting properties (dynamic efficiency, egalitarism, easy implementation). Then the opportunity to move to a partially funded system is examined. It turns out that a partially funded system ensures the equality of utility within and across generations. The effective use of funding opportunities is less a question of rate of return than a question of equal treatment of individuals.
Original language | English |
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Pages (from-to) | 121-140 |
Number of pages | 20 |
Journal | Journal of Economic Behavior and Organization |
Volume | 47 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2002 |
Externally published | Yes |
Keywords
- Myopic behavior
- Public pensions