Template-Type:ReDIF-Paper 1.0  
Title: mic Efficiency and Pareto Optimality in a Stochastic OLG Model with Production and Social Security
Author-Name: Martin Barbie
Author-Name: Marcus Hagedorn
Author-Name: Ashok Kaul
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Classification-JEL: D61, H55 
Keywords: Stochastic OLG Model, Dynamic Efficiency, Interim Pareto Optimality, Social Security, Risk Sharing
Abstract: We analyze the interaction between risk sharing and capital accumulation
	in a stochastic OLG model with production. We give a complete characterization
	of interim Pareto optimality. Our characterization also subsumes equilibria
	with a PAYG social security system. In a competitive equilibrium interim Pareto
	optimality is equivalent to intergenerational exchange efficiency, which in
	turn implies dynamic efficiency. Furthermore, dynamic efficiency does not rule
	out a Pareto-improving role for a social security system. Social security can
	provide insurance against macroeconomic risk, namely aggregate productivity
	risk in the second period of life (old age) through dynamic risk sharing.
	We briefly relate our results to models without uncertainty where the notions
	of exchange efficiency, dynamic efficiency and interim Pareto optimality are
	all equivalent in a competitive equilibrium.
Length: 31 pages
Creation-Date: 2000-02
Revision-Date: 2000-06
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse8_2000.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse8_2000