Capital accumulation under a pay‐as‐you‐go social security: The influence of labour growth

Deals with the influence of the labour growth rate on the capital per head in an economy with a pay‐as‐you‐go social security. Carries out the analysis within an overlapping generations model of a closed economy. Analyses the consequences of a shock on the labour growth rate. A decline of the labour growth rate might reduce the maximum sustainable social security. Normally it will increase capital per head, but with a high social security there might be an inverse reaction. Concludes that this is due to an increased burden of social security on the active generation.