SOCIAL SECURITY AND INTERGENERATIONAL

Many countries around the world have large public pension programs with signif-icant cross-cohort redistribution. This paper provides a rationale for such programs in a lifecycle framework with search and matching frictions in the labor market. In the model, public pension programs alter the age composition of the labor force by inducing the jobless elderly to retire. This improves the allocation of workers to jobs, raises rm entry and may also improve welfare. By requiring a long history of labor market attachment as a precondition to receiving bene\u85ts, these programs raise the fu-ture value of current employment for the young. This redistributes bargaining strengt