Chapter

Computing Models of Social Security

Ayşe İmrohoroğlu, Selahattin İmrohoroğlu and Douglas H. Joines

in Computational Methods for the Study of Dynamic Economies

Published in print October 2001 | ISBN: 9780199248278
Published online November 2003 | e-ISBN: 9780191596605 | DOI: http://dx.doi.org/10.1093/0199248273.003.0010
 Computing Models of Social Security

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A core topic of current economic research (and policy debate) is the evaluation of social security systems and their possible reforms. Shows how models of social security can be computed in economies where agents have uncertain lifespans and earnings profiles. In particular, it shows how to solve stationary equilibria and (within a linear quadratic formulation) how to solve transitional equilibria, such as the transition following a reform of the system. The two main sections of the chapter present: a model of social security with heterogeneous agents, which is related to several recent large‐scale general equilibrium, overlapping generations models; and a linear quadratic model of social security. These are both versions of an overlapping generations model with incomplete markets, and both assume that private annuity markets are missing, but they differ in their preference structures and certain other respects.

Keywords: dynamic economics models; earnings profiles; economic reform; general equilibrium models; heterogeneous agents; incomplete markets; lifespan; linear quadratic models; macroeconomics; overlapping generations models; social security; stationary equilibria; transitional equilibria

Chapter.  9974 words. 

Subjects: Macroeconomics and Monetary Economics

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