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Full-Text Articles in Social and Behavioral Sciences
A Stochastic Overlapping Generations Economy With Inheritance, Ioannis Karatzas, Martin Shubik, William D. Sudderth
A Stochastic Overlapping Generations Economy With Inheritance, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Cowles Foundation Discussion Papers
An overlapping generations model of an exchange economy is considered, with individuals having a finite expected life-span. Conditions concerning birth, death, inheritance and bequests are fully specified. Under such conditions, the existence of stationary Markov equilibrium is established in some generality, and several explicitly solvable examples are treated in detail.
Social Security Investment In Equities In An Economy With Short-Term Production And Land, Peter A. Diamond, John Geanakoplos
Social Security Investment In Equities In An Economy With Short-Term Production And Land, Peter A. Diamond, John Geanakoplos
Cowles Foundation Discussion Papers
This paper explores the general equilibrium impact of social security portfolio diversification into private securities, either through the trust fund or via private accounts. The analysis depends critically on heterogeneity in saving, in production, in assets, and in taxes. Under fairly general assumptions we show that limited diversification increases a neutral social welfare function, increases interest rates, reduces the expected return on short-term equity (and thus the equity premium), decreases safe investment and increases risky investment. However, the effect on aggregate investment, long-term capital values, and the utility of young savers hinges on delicate assumptions about technology. Aggregate investment and …