Population age structure and the size of social security.

"This paper uses a general overlapping generations model to analyze social security. Rather than focusing on intertemporal price and income considerations, however, the paper focuses on the effect of contemporaneous (same period) prices and income. The analysis shows that the old-age dependency ratio acts as a shadow price for old-age benefits. With this new shadow price, the equilibrium price and quantity of social security benefits and the level of the payroll tax rate are determined in a demand-supply framework with individual utility maximization. Three explicit demand functions (intergenerational contracts) are analyzed. The model is tested using [U.S.] time series data for the social security Old-Age and Survivors (OASI) program."