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How Does Differential Mortality Affect Social Security Finances and Progressivity? Working Paper 2005-05

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  • Amy Rehder Harris
  • John Sabelhaus
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    Abstract

    The Congressional Budget Office Long-Term (CBOLT) model uses dynamic micro-simulation for a representative sample of the population to analyze the aggregate and distributional effects of Social Security policy. In the model, overall mortality rates by age and sex are calibrated to match Social Security Trustees projections, and differential mortality (the difference in death rates across socioeconomic groups) is introduced using a combination of disability-specific mortality and a technique for the non-disabled developed by Lillard and Panis (1999). In this paper, the question of how differential mortality affects Social Security finances and progressivity is approached through sensitivity analysis using CBOLT. The model is solved using a range of assumptions about differential mortality, and the impact on various outcomes is assessed. In contrast to inferences in several recent studies, the results here suggest that differential mortality does not play a significant role in determining progressivity or system finances. It is true that socioeconomic differentials in death rates work counter to Social Security’s statutory redistribution and make the system costs higher, but the effects are probably only of second-order significance.

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    Bibliographic Info

    Paper provided by Congressional Budget Office in its series Working Papers with number 16493.

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    Date of creation: 01 May 2005
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    Handle: RePEc:cbo:wpaper:16493

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    1. Diane Lauderdale, 2001. "Education and survival: Birth cohort, period, and age effects," Demography, Springer, vol. 38(4), pages 551-561, November.
    2. Alan L. Gustman & Thomas L. Steinmeier, 2000. "How Effective is Redistribution Under the Social Security Benefit Formula?," NBER Working Papers 7597, National Bureau of Economic Research, Inc.
    3. 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, October.
    4. Brian S. Armour & M. Melinda Pitts, 2002. "Incorporating insurance rate estimates and differential mortality into net marginal Social Security tax rate calculations," Working Paper 2002-29, Federal Reserve Bank of Atlanta.
    5. Barry P. Bosworth & Gary Burtless, 2004. "Supply-Side Consequences of Social Security Reform: Impacts on Saving and Employment," Working Papers, Center for Retirement Research at Boston College wp2004-1, Center for Retirement Research, revised Jan 2004.
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