Anyone for Social Security Reform?

The Institute of Economics will hold a meeting of its Seminar Series on Thursday, May 8, 2018: Partha Sen from University of Delhi will give a seminar on "Anyone for Social Security Reform?".

Abstract: A reform of a pay-as-you-go social security makes the pensioners worse off and the working generations better off in the period of the reform (in a dynamically efficient economy without altruism). The observed reluctance across all age groups to support such reforms is usually explained by the insurance properties of these schemes. I propose an alternative in a two sector setting. Since the old consume labor-intensive goods like healthcare etc., the reform causes labor demand to fall and reduces wages. This effect could dominate the lower social security payments for the young. Thus both the young and old oppose the reform (that makes the unborn generations better off--the new steady welfare, with a higher capital stock, is higher).