Discussion Paper

No. 2007-5 | March 01, 2007
Variable Retirement and the Effects of Social Insurance on Savings, Wealth, and Welfare

Abstract

We construct a Blanchard-style overlapping generations model consisting of long-lived individuals who have uninsurable idiosyncratic risk resulting from uncertain retirement periods and medical costs in retirement. Without social insurance, such individuals must save for these eventualities. We examine the impact of pay-as-you-go social insurance policies (public pensions and medicare coverage) on individual and aggregate consumption, saving, and wealth levels as well as wealth distribution. We also derive expressions for optimal (Pareto improving) social insurance policies.

JEL Classification

D91 E10 J20

Cite As

Neil Bruce and Stephen J. Turnovsky (2007). Variable Retirement and the Effects of Social Insurance on Savings, Wealth, and Welfare. Economics Discussion Papers, No 2007-5, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2007-5

Assessment



Comments and Questions


anonymous - Referee Report
April 17, 2007 - 09:18

see attached file


Stephen Turnovsky - Response to referee
April 27, 2007 - 16:33

We are attaching a response to the referee report on our paper