TITLE:
Partially Funded Social Security and Inter-Generational Distribution
AUTHORS:
Hyeon Park
KEYWORDS:
Partially Funded Social Security, Inter-Generational Distribution, Welfare
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.9,
December
9,
2014
ABSTRACT: This paper introduces a parametric model of
partially funded social security system and analyzes inter-generational
distribution of consumption and welfare in an OLG general equilibrium. This
paper specifically aims to examine the effects of transition toward more funded
system on saving and capital accumulation. It is shown that an increase in
intensity of fundedness increases capital accumulation unless the income effect
from interest rate change outweighs other effects and negatively affects the
total saving severely. By deriving closed form solutions for the variables,
this paper finds that an increase in the intensity of fundedness increases
saving but decreases consumption, when population growth rate is greater than
the net return to capital. This paper also finds that for a partially funded
system, an increase in tax rate increases public saving but reduces private
saving unambiguously, while the effects on consumption and capital accumulation
are not conclusive.