Social Security and Intergenerational Equity
Giancarlo Marini and Pasquale Scaramozzino
Universita di Roma Tor Vergata and SOAS, Univ. of London
This paper considers the implications of social security for intergenerational
equity. It is shown that a balanced-budget unfunded system can be optimal
even in a dynamically efficient economy without uncertainty and externalities.
The relevant criteria for the optimality of the public transfer programme are
equity among generations and time consistency. The scheme can survive
adverse shocks if the well-being of the elderly at each point in time is sufficiently
valued. The results are confirmed when the supply side is modelled for allow
for endogenous growth.