Carnegie-Rochester Conference Series on Public Policy最新文献

An important aspect of the current U.S. social security system is the tradeoff between the risk-sharing it provides and the distortions it imparts on private decisions. We focus on this tradeoff as it applies to labor market risk and capital accumulation. Specifically, we compare the current U.S. system to a particular proposal put forth in 1996 by the federal Advisory Council on Social Security (1996). We also examine the merits of abolishing social security altogether. We find that, absent general equilibrium effects, the risk-sharing benefits of the current system outweigh the distortions associated with either the alternative or a system of privately administered pensions. Once we incorporate equilibrium effects, however, the interaction between the social security system, private-savings decisions, and the means with which the government finances its nonpension expenditures results in a significant welfare benefit being associated with either reform or abolition. These welfare gains arise in spite of the fact that we explicitly incorporate the ‘social security debt’: the social cost of meeting the obligations associated with the current system.

This paper develops a tractable overlapping generations model that is useful for analyzing both the short- and long-run impact of fiscal policy and social security. It modifies the Blanchard (1985)/Weil (1987) framework to allow for life-cycle behavior. This is accomplished by introducing random transition from work to retirement, and then from retirement to death. The transition probabilities may be picked to allow for realistic average lengths of life, work, and retirement. The resulting framework is not appreciably more difficult to analyze than the standard Cass/Koopmans one-sector growth model: besides the capital stock, there is only one additional state variable: the distribution of wealth between workers and retirees. The model also allows for variable labor supply. Under reasonable parameter values government debt and social security have significant effects on capital intensity.

In many countries, current unfunded public pension systems are unsustainable. Though agents recognize that fiscal imbalances will be eliminated sooner or later, the timing of reforms and future policy mixes are typically unknown. The paper proposes a tractable framework to study forthcoming but ill-specified events, such as a crisis in the pension system, within a macroeconomic model based on individual life-cycle optimization. The uncertainty about the timing of a future stabilization is modeled by a subjective hazard function where the state-dependent hazard rate depends on a measure of the public-pension system's expected net liabilities. Using Switzerland as a motivating example, the model is calibrated and simulated under a number of alternative policy options and different perception patterns. Expectations prior to a reform are shown to have large impacts on aggregate variables and on cross-generations profiles of consumption and labor supply. In comparison to well-specified pre-announced stabilization policies, timing uncertainty and misperceptions can lead to welfare losses, in particular for the middle-aged and the elderly.

Yes, subject to concerns about Medicare cost and potentially self-confirming skepticism. The U.S. social security system (broadly defined, including Medicare) faces significant financial problems as the result of an aging population. But demographic change is also likely to raise savings, increase wages, and reduce interest rates. Viewed in this context, the fiscal problems of retirement insurance seem over-rated. A more serious issue is the rapid growth of Medicare spending. Up to a point, a growing GDP-share of medical spending is an efficient response to an aging population. But Medicare growth might be excessive due to moral hazard problems. Except for this caveat, social security is almost certainly economically viable. To examine the political viability of social security, I focus on intertemporal cost-benefit tradeoffs in a median-voter setting. For a variety of assumptions, I find that social security will retain majority support. I also discuss the role of altruism, redistribution, and multi-dimensional voting and find that they provide additional voter support for social security.