In the first essay, we analyze the welfare effects of an unfunded social security system. We do so using an overlapping generations economy wherein agents have self-control preferences, face mortality risk, individual income risk, and borrowing constraints. Given our specification of preferences, unfunded social security helps reduce the agents' temptation to consume in every period; consequently, the welfare costs it otherwise entails are substantially mitigated. While both social security and self-control when considered separately reduce welfare, their combination renders this effect considerably less severe. Moreover, if the cost of resisting temptation is very high, the introduction of social security might even improve welfare.In the second essay I use a dynamic stochastic general equilibrium overlapping generations model to examine the relevance of unfunded social security in an environment where both CRRA and self-control agents co-exist. I identify conditions under which the existence of CRRA agents in the economy makes self-control agents better-off. I, therefore, conclude that temptation prevalence across individuals in the economy and temptation intensity within individuals can be considered to be substitutes in reducing the welfare cost associated with unfunded social security for self control agents.In the third essay we analyze a fully funded social security system under the assumption that agents face temptation issues. Agents are required to save through individually managed Personal Security Accounts without, and with mandatory annuitization. When the analysis is restricted to CRRA preferences our results are congruent with the literature in indicating that the complete elimination of social security is the reform scenario that maximizes welfare. However, when self control preferences are introduced, and as the intensity of self control becomes progressively more severe the "social security elimination" scenario loses ground very rapidly. In fact, in the case of very severe temptation the elimination of social security becomes the least desirable alternative. Under the light of the above findings, any reform proposal regarding the social security system should consider departures from standard preferences to preference specifications suitable for dealing with preference reversals
