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Optimal Response to a Transitory Demographic Shock in Social Security Financing
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| Venue: | Pension Strategies in Europe and the United |
| Citations: | 10 - 9 self |
BibTeX
@INPROCEEDINGS{Conesa_optimalresponse,
author = {Juan C. Conesa and Carlos Garriga},
title = {Optimal Response to a Transitory Demographic Shock in Social Security Financing},
booktitle = {Pension Strategies in Europe and the United},
year = {},
pages = {98--113},
publisher = {MIT Press}
}
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Abstract
The authors consider a transitory demographic shock that affects negatively the financing of retirement pensions—that is, workers either would have to pay more or retirees would receive less. In contrast to the existing literature, the authors endogenously determine optimal policies rather than explore the implications of exogenous parametric responses. Their approach identifies optimal strategies of the Social Security Administration to guarantee the financial sustainability of existing retirement pensions in a Pareto-improving way. Hence, no cohort will pay the cost of the demographic shock. The authors find that the optimal strategy is based on the following ingredients: elimination of compulsory retirement, a change in the structure of labor income taxation, and a temporary increase in the level of government debt. (JEL D58, D91, H55) Federal Reserve Bank of St. Louis Review, January/February 2009, 91(1), pp. 33-48. The financial sustainability of the Social Security system is an important policy concern due to the aging of the U.S. population and in particular of the baby-boom generation. According to estimates
Keyphrases
transitory demographic shock optimal response social security financing retirement pension financial sustainability social security administration louis review optimal policy baby-boom generation approach identifies optimal strategy following ingredient january february pareto-improving way important policy concern temporary increase exogenous parametric response government debt compulsory retirement federal reserve bank u.s. population jel d58 social security system labor income taxation demographic shock optimal strategy
