Tim Worrall: Sustainable Social Security
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A/EW105, Alcuin East Wing, Campus West, University of York (Map)
Event details
Author: Tim Worrall (Edinburgh)
Abstract: We study the optimal design of a sustainable social security system in an economy facing demographic uncertainty, under the political constraint that no generation can veto the allocation at any date or state. A benevolent social planner, aiming to maximise the expected lifetime utility of all generations, must balance efficient intergenerational risk sharing, maintaining participation incentives for contributors, and honouring accrued claims of retirees. This balance calls for a system that blends defined-benefit and defined-contribution features with longevity adjustments: benefits are unrelated to past contributions when contribution rates are low but become linked to contributions when rates exceed a threshold to sustain participation. Public savings, such as public reserve funds, can buffer demographic shocks, reducing reliance on higher contributions and loosening the link between benefits and contributions.
Authors: Sergio Cappellini (Navarre), Francesco Lancia (Venice), Alessia Russo (Padua) and Tim Worrall (Edinburgh).
Host: Yuan Ju (York)
Cluster: Micro Theory
Office: A/D011