2. Suppose that a pay-as-you-go public pension system is introduced. At each point in time, N...

 

Transcribed Image Text:

2. Suppose that a pay-as-you-go public pension system is introduced. At each point in time, N old people receive benefits p paid for by N' young people, who each make contributions t, hence pN tN'. The population growth rate is n, hence N' = (1 + n)N. Write down the life-time budget constraint of a young = person after the system is introduced and explain what is needed for all genera- tions to benefit from the pay-as-you-go pension system. 2. Suppose that a pay-as-you-go public pension system is introduced. At each point in time, N old people receive benefits p paid for by N' young people, who each make contributions t, hence pN tN'. The population growth rate is n, hence N' = (1 + n)N. Write down the life-time budget constraint of a young = person after the system is introduced and explain what is needed for all genera- tions to benefit from the pay-as-you-go pension system.

Answer rating: 100% (QA)

The lifetime budget constraint of a young person after the introduction of a payasyougo pension system can be expressed as follows Total Lifetime Inco... View the full answer