PAYG pensions and economic cycles

Fanti, Luciano and Gori, Luca (2010): PAYG pensions and economic cycles.

Abstract

This article analyses the dynamics of an overlapping generations economy (Diamond, 1965) with pay-as-you-go financed public pensions and myopic expectations. It is shown that large PAYG pensions triggers economic fluctuations depending on the mutual relationship between technology and preference parameters. Our findings constitute a policy warning about the size of social security and provide another explanation of the occurrence of persistent cycles.

• Item Type: MPRA Paper
• Language: English
• Keywords: Myopic foresight; PAYG pensions; Stability; OLG model
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J26 - Retirement ; Retirement Policies; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium

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