Idiosyncratic risk, aggregate risk, and the welfare effects of social security


Harenberg, Daniel ; Ludwig, Alexander


[img]
Preview
PDF
dp18016.pdf - Published

Download (935kB)

URL: https://ub-madoc.bib.uni-mannheim.de/45652
URN: urn:nbn:de:bsz:180-madoc-456523
Document Type: Working paper
Year of publication: 2018
The title of a journal, publication series: ZEW Discussion Papers
Volume: 18-016
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: C68 , E27 , E62 , G12 , H55,
Keywords (English): Social security , idiosyncratic risk , aggregate risk , welfare
Abstract: We ask whether a pay-as-you-go financed social security system is welfare improving in an economy with idiosyncratic productivity and aggregate business cycle risk. We show analytically that the whole welfare benefit from joint insurance against both risks is greater than the sum of benefits from insurance against the isolated risk components. One reason is the convexity of the welfare gain in total risk. The other reason is a direct risk interaction which amplifies the utility losses from consumption risk. We proceed with a quantitative evaluation of social security’s welfare effects. We find that introducing an unconditional minimum pension leads to substantial welfare gains in expectation, even net of the welfare losses from crowding out. About 60% of the welfare gains would be missing when simply summing up the isolated benefits.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




+ Citation Example and Export

Harenberg, Daniel ; Ludwig, Alexander (2018) Idiosyncratic risk, aggregate risk, and the welfare effects of social security. Open Access ZEW Discussion Papers Mannheim 18-016 [Working paper]
[img]
Preview


+ Search Authors in

+ Download Statistics

Downloads per month over past year

View more statistics



You have found an error? Please let us know about your desired correction here: E-Mail


Actions (login required)

Show item Show item