AGING AND PUBLIC PENSIONS IN AN OVERLAPPING-GENERATIONS MODEL

In this paper a social-welfare maximizing public-pension policy is mod eled within the framework of the well-known two-overlapping-generation s general-equilibrium model with rational expectations. The model is u sed to analyze the effects of aging on the evolution of public pension schemes. Analytical results are derived for the long run as well as f or the short run by the method of comparative statics and comparative dynamics respectively. This shows that the short-run consequences of a ging depend crucially on the existing size of the PAYG-scheme.