How does social security affect economic growth? Evidence from cross-country data

This paper investigates how social security interacts with growth and growth determinants (savings, human capital investment, and fertility). Our empirical investigation finds that the estimated coefficient on social security is significantly negative in the fertility equation, insignificant in the saving equation, and significantly positive in the growth and education equations. By contrast, the estimated coefficient on growth is insignificant in the social security equation. The results suggest that social security may indeed be conducive to growth through tipping the trade-off between the number and quality of children toward the latter.

Long-run effects of unfunded social security with earnings-dependent benefits

This paper examines the effects of unfunded social security with bequests, fertility and human capital by considering a mix of earnings-dependent and universal social security benefits. We show that social security is more likely to promote growth by reducing fertility and increasing human capital investment if its benefits are more dependent on individuals' own earnings. Through simulations, we find that the differences in the effects of social security resulting from variations in the benefit formula can be too substantial to be ignored. We also investigate the welfare effect in calibrated economies. (C) 2003 Elsevier B.V. All rights reserved.