Abstract:This paper investigates the implications of different social security systems on economic growth, when growth is engined by both human and physical capital accumulation. To do so, I extend the standard overlapping generations model with individuals that in their first period of life divide their time between education activities and working activities. Thus, the model allows for skill acquisition which affects economic growth. In their second period of life, individuals are old and receive pension benefits assumed to be positively related to human capital formation. It is shown that the introduction of an unfunded pension scheme in a Laissez-Faire economy decreases output growth, while a properly designed public funded pension scheme will lead to higher growth.