Social security, bequests, and social comparisons
- Author(s)
- Kirill Borissov, Andrei Kalk
- Abstract
We examine the long-run impact of unfunded social security on capital stock and wealth inequality in an overlapping generations (OLG) model where newborn individuals differ in their inheritance. In our model, individuals' decisions are subject to social comparisons, which can lead to overspending on personal consumption and result in zero bequests left within poor families. In this scenario, unfunded social security increases long-run wealth inequality by redistributing wealth from poor to rich families, who always leave bequests. However, it increases long-run capital stock, too. We also show that when none or all of the families leave bequests in the long run, our model predicts negative and neutral effects of social security on capital accumulation, in line with the standard OLG models of Diamond and Barro. Thus, our results emphasize the need to account for heterogeneity in bequest behavior in the analysis of social security.
- Organisation(s)
- Department of Economics
- External organisation(s)
- European University at St. Petersburg
- Journal
- Journal of Public Economic Theory
- Volume
- 26
- ISSN
- 1097-3923
- DOI
- https://doi.org/10.1111/jpet.12698
- Publication date
- 06-2024
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502046 Economic policy, 502024 Public economy, 502018 Macroeconomics
- Keywords
- ASJC Scopus subject areas
- Economics and Econometrics
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/e3e6ab0f-8aa8-4a71-87cd-402c41f7616a