Preference Heterogeneity, Aggregate Risk and the Welfare Effects of Social Security

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• 研討會日期 : 2019-01-16
• 時間 : 11:00
• 主講人 : Mr. Eungsik Kim
• 主持人 : Professor Tzu-Ting Yang
• 地點 : Conference Room B110
• 演講者簡介 : Mr. Kim will receive his Ph.D. in Economics from Tepper School of Business, Carnegie Mellon University, Pittsburgh in 2019. His research interests are Macroeconomics, Public Economics, Political Economics, Computational Economics, Economic Theory, Financial Economics (Asset Pricing). He is applying for a position of the Institute of Economics, Academia Sinica now.
• 演講摘要 : This paper quantitatively studies the distributional welfare implications of a pay-as-you-go social security system in a lifecycle model with ex-ante household heterogeneity in both preferences and lifecycle income streams, classified by education levels and borrowing costs. To analyze this problem, I provide an algorithm to solve a large-scale model with ex-ante heterogeneous and long-period-lived agents, borrowing constraints, and multiple assets where state aggregation methods generate large errors in optimal choices which should be avoided for quantitative welfare analysis. Through a welfare decomposition analysis, I determine the sources of welfare benefits and costs for each educational group. In the baseline calibration, I find that high-school dropouts and college educated groups are advantaged, while the high-school graduates group is disadvantaged by the welfare system. The high-school dropouts obtain a welfare gain mostly from intragenerational redistribution from the other income richer groups through the social security system. The college graduates group experiences a welfare loss from such redistribution, but old-age consumption insurance and increases in asset returns provide a substantial offsetting welfare gain to this most patient and risk-averse group. The high-school graduates receive a welfare gain from both intragenerational redistribution and consumption insurance. However, borrowing constraints strengthen the welfare cost of the social security system for this group by preventing consumption smoothing during the early stage of life which is essential especially when wages are reduced by crowding out.