The Design of Optimally Balanced Pay-as-you-go Social Security Systems
Abstract
This paper bridges social security design and general equilibrium theory to conceive optimally balanced pay-as-you-go systems. The design is based on the backward calculation algorithm from Dognini (2025), which is used to find optimal monetary equilibria of prone-to-savings non-stationary overlapping generations economies with heterogeneous households. In particular, this algorithm makes the design applicable for reforming pay-as-you-go systems in countries undergoing demographic transitions. Due to households balanced budgets under equilibrium prices (i.e., Walras' law), these optimally balanced pay-as-you-go systems resemble the well-known notional accounts systems. The design is illustrated in a simplified framework using the past and forecast demographic and productivity dynamics of Brazil, China, India, Italy, and the United States from 1950 to 2070.
Keywords
Cite
@article{arxiv.2604.12125,
title = {The Design of Optimally Balanced Pay-as-you-go Social Security Systems},
author = {Leandro Lyra Braga Dognini},
journal= {arXiv preprint arXiv:2604.12125},
year = {2026}
}