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Essays on private and social financial security.
Thesis information
Author:
Forni, Lorenzo.;Advisor(s):
Kotlikoff, Laurence J.Degree:
Ph.D.School:
Boston University.Year:
2001Full Abstract
The dissertation consists of three essays on the issue of household financial security, both from a microeconomic point of view (that is, in terms of households' choices) and from a macroeconomic point of view (that is, in terms of the rules governing the social security system). In particular, the first essay examines the adequacy of life insurance among American couples approaching retirement. The essay is based on recent, high-quality data (the 1992 Health and Retirement Survey with matched Social Security earnings histories) and assesses the adequacy of life insurance taking into account the social security system survivor scheme, which provides some life insurance coverage. The results show that a sizable minority of couples in the HRS sample are significantly underinsured. The second essay focuses on the sustainability (and desirability) of public pay-as-you-go (PAYG) social security systems; it examines the characteristics of intergenerational transfers in a standard overlapping generations model with short-lived governments that care only about the welfare of younger generations. It shows how a PAYG scheme can be sustained in equilibrium even when young cohorts act selfishly, although the resulting equilibrium may be inefficient. The third essay is a case study on the Italian pension system and attempts to assess the costs of a partial transition from a pure PAYG pension system to a two-pillar system, with a sizable funded component. The essay shows that the costs of the transition would be sizable (around 1.8% of GDP on a yearly basis), although they might be substantially reduced by efficiency gains resulting from the transition (i.e. positive effects on employment). Overall the three essays point to the rather stable nature of PAYG social security systems and to the fact that, as in the Italian case, they are very costly to change in the direction of partial funding; on the other hand, PAYG social security systems provide limited life insurance coverage to households and, as is well known, progressively less old-age support.
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