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The Impact of Social Security and Other Factors on the Distribution of Wealth

In: The Distributional Aspects of Social Security and Social Security Reform

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  • Jagadeesh Gokhale
  • Laurence J. Kotlikoff

Abstract

Auerbach et al. (1995), document the dramatic postwar increase in the annuitization of the resources of America's elderly. Gokhale et al. (1996) suggest that greater annuitization may explain the significant postwar rise in the consumption propensity of the elderly out of remaining lifetime resources. Gokhale et al. (2000) consider the related point that increased annuitization will reduce bequests, especially for lower and middle-income households, whose entire earnings are taxed under Social Security. By differentially disenfranchising the children of the poor from receipt of inheritances, Social Security may materially alter the distribution of wealth. This paper uses data from the PSID to further analyze how Social Security and other factors affect wealth inequality. The Gini coefficient of the simulated equilibrium wealth distribution is 21 percent larger and the share of wealth held by the wealthiest 1 percent of households is 79 percent higher in the presence of Social Security.

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This chapter was published in:

  • Martin Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Aspects of Social Security and Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number feld02-1, July.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9749.

    Handle: RePEc:nbr:nberch:9749

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    Cited by:
    1. Turnovsky, Stephen J. & Bruce, Neil, 2007. "Uncertain Retirement and the Effects of Social Insurance on Savings, Wealth, and Welfare," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 1(2), pages 1-41.
    2. Jeffrey R. Brown & Courtney C. Coile & Scott J. Weisbenner, 2006. "The Effect of Inheritance Receipt on Retirement," NBER Working Papers 12386, National Bureau of Economic Research, Inc.
    3. Tricia Gladden & Christopher Taber, 2009. "The relationship between wage growth and wage levels," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 914-932.

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