Working Paper Number
WP #34912, February 2012
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.
Published in Macroeconomic Dynamics, Vol. 17 no. 5 (July 2013): 971-997. http://dx.doi.org/10.1017/S1365100511000794
This version: February 10, 2012 (Original version: December 8, 2009).
Andersen, Torben M. and Bhattacharya, Joydeep, "Unfunded pensions and endogenous labor supply" (2012). Economics Working Papers (2002–2016). 58.