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Is Social Security behind the Collapse of Personal Saving?

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Author Info
Frank N. Caliendo ()
Abstract

This paper considers the quantitative role of growth in the size of the social security program in contributing to the collapse of personal saving in the U.S. over the last few decades. Using a calibrated, general equilibrium life-cycle model this paper shows that social security may not be to blame. Specifically, the model predicts that a 50-percent increase in the social security tax rate (as in the U.S. over the last half century) produces a modest decline in the personal saving rate from 10 percent down to 9.6 percent. This result runs counter to some popular opinion.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2746.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2746

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Related research
Keywords: NIPA personal saving rate; social security; life-cycle permanent-income model; general equilibrium calibration;

Find related papers by JEL classification:
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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This page was last updated on 2009-12-1.

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