Reference no: EM132410777
Intro: Now, consider an overlapping generation set up with pay-as-you-go social security system in a hypothetical economy. There are 100 old retirees and 103 young workers at the current period. Old retirees earned $1,000 each when they were young. Young workers now earn $1,040 each. Now, suppose that the population growth is constant and there is a fixed payroll tax of 15%, which is used to finance the pay-as-you-go social security system.
Now, using the information,
What is the population growth rate, variable n?
How much is the total contribution of young workers to the social security system in the current period?
How much does each retiree receive from the social security system?
How much was the contribution of each old retiree when he or she was young?
What is the implicit return on the social security system?
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