Kiel Working Papers, Kiel Institute for World Economics
No 957:
Social Security and Redistribution Within Generations in an Overlapping-Generations Model
Oliver Lorz
Abstract: An overlapping generations model is set up in this paper
to analyze social security policy in a representative democracy with
asymmetric information. The model considers not only redistribution between
generations but also redistribution within generations according to
individual labor incomes. Labor supply and savings are endogenous. The
government is able to observe labor incomes, but not labor supply, savings
or capital incomes. Two main results are derived in this setting: First,
consumption levels are perfectly equalized within both generations. Second,
a redistribution bias exists in favor of the old generation: the old
generation receives a higher level of consumption than the young generation
although both generations have the same weight in the objective function of
the government.
Keywords: Overlapping generations, redistribution, political economy, asymmetric information.; (follow links to similar papers)
JEL-Codes: E62; D78; D82; (follow links to similar papers)
26 pages, October 1999
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