On Long-term Forecasting of Social Security: A Robustness Analysis
In this paper we present a macro-economic demographic growth modelhaving a special focus on social security. It is designed to study the variability of responses of the system in presence of risks and uncertainties. Here we analyze the robustness of the model towards uncertainties in parameterspecifications, introduced by ARCH-M models with the incorporation ofintervention processes. The parameters varied are labor force participationrates (one of the key sources of uncertainty in the social security policydebate), and the parameters of the production function (the key source ofuncertainty in any long-run economic analysis). The sensitivity analysisfocuses on two variables: assets of the private pension system and thebalance of the public `Pay As You Go' pension system. Special attentionis given to convergence properties of the macro-economic model.
This paper incorporates labor search frictions into a model with lumpy capital to explain a set of stylized facts about the United States labor market dynamics over business cycles. All of these facts are related to …rm size: (1) job creation is procyclical in both small and large …rms; (2) job destruction is countercyclical in large …rms, but, paradoxically, it is procyclical in small …rms; and (3) job creation and job destruction are more volatile in large …rms than in small …rms. The model is calibrated to US data and its predictions are broadly consistent with the facts. The success of the model relies on the interaction between labor search and lumpy capital. Search frictions imply that even if two …rms have the