Social Security Reform and Temptation
AbstractThis paper analyzes a fully funded social security system under the assumption that agents face temptation issues. Agents are required to save through individually managed Personal Security Accounts without, and with mandatory annuitization. When the analysis is restricted to CRRA preferences our results are congruent with the literature indicating that the complete elimination of social security is the reform scenario that maximizes welfare improvement. However, when self control preferences are introduced, and as the intensity of self control becomes progressively more severe the "social security elimination" scenario loses ground very rapidly. In fact, in the case of very severe temptation the elimination of social security becomes the least desirable alternative. Under the light of the above findings, any reform proposal regarding the social security system should consider departures from standard preferences to preference specifications suitable for dealing with preference reversals.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2778.
Date of creation: 2009
Date of revision:
funded social security; unfunded social security; self-control preferences;
Find related papers by JEL classification:
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 2003.
"Time-Inconsistent Preferences And Social Security,"
The Quarterly Journal of Economics,
MIT Press, vol. 118(2), pages 745-784, May.
- Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 2000. "Time inconsistent preferences and Social Security," Discussion Paper / Institute for Empirical Macroeconomics 136, Federal Reserve Bank of Minneapolis.
- Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November.
- Mark Huggett & Gustavo Ventura, 1998.
"On the Distributional Effects of Social Security Reform,"
9801, Centro de Investigacion Economica, ITAM.
- Mark Huggett & Gustavo Ventura, 1999. "On the Distributional Effects of Social Security Reform," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 498-531, July.
- Hugett, M. & Ventura, G., 1997. "On the Distributional Effects of Social Security Reform," UWO Department of Economics Working Papers 9710, University of Western Ontario, Department of Economics.
- Feldstein, Martin & Liebman, Jeffrey B., 2002.
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324
- Peter A. Diamond & Peter R. Orszag, 2005. "Saving Social Security," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 11-32, Spring.
- Hans Fehr & Christian Habermann & Fabian Kindermann, 2006.
"Social Security with Rational and Hyperbolic Consumers,"
010, Bavarian Graduate Program in Economics (BGPE).
- Hans Fehr & Christian Habermann & Fabian Kindermann, 2008. "Social Security with Rational and Hyperbolic Consumers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 884-903, October.
- Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
- Juan A. Rojas & Carlos Urrutia, 2006.
"Social Security Reform with Uninsurable Income Risk and Endogenous Borrowing Constraints,"
Banco de Espaï¿½a Working Papers
0602, Banco de Espa�a.
- Juan Rojas & Carlos Urrutia, 2004. "Social Security Reform with Uninsurable Income Risk and Endogenous Borrowing Constraints," Macroeconomics 0410010, EconWPA.
- Juan A. Rojas & Carlos Urrutia, 2004. "Social Security Reform with Uninsurable Income Risk and Endogenous Borrowing Constraints," Working Papers 0409, Centro de Investigacion Economica, ITAM.
- Kjetil Storesletten & Chris Telmer & Amir Yaron, 1998.
"The risk sharing implications of alternative social security arrangements,"
GSIA Working Papers
252, Carnegie Mellon University, Tepper School of Business.
- Storesletten, Kjetil & Telmer, Chris I. & Yaron, Amir, 1999. "The risk-sharing implications of alternative social security arrangements," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 213-259, June.
- Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1995. "A Life Cycle Analysis of Social Security," Economic Theory, Springer, vol. 6(1), pages 83-114, June.
- Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2005. "Personal Security Accounts and Mandatory Annuitization in a Dynastic Framework," CESifo Working Paper Series 1405, CESifo Group Munich.
- Hans Fehr & Fabian Kindermann, 2009.
"Pension funding and individual accounts in economies with life-cyclers and myopes,"
2009/23, Institut d'Economia de Barcelona (IEB).
- Hans Fehr & Fabian Kindermann, 2010. "Pension Funding and Individual Accounts in Economies with Life-cyclers and Myopes," CESifo Economic Studies, CESifo, vol. 56(3), pages 404-443, September.
- Hans Fehr & Fabian Kindermann, 2009. "Pension Funding and Individual Accounts in Economies with Life-cyclers and Myopes," CESifo Working Paper Series 2724, CESifo Group Munich.
- Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2003.
"Annuities and Individual Welfare,"
NBER Working Papers
9714, National Bureau of Economic Research, Inc.
- Faruk Gul & Wolfgang Pesendorfer, 2004.
"Self-Control and the Theory of Consumption,"
Econometric Society, vol. 72(1), pages 119-158, 01.
- Kumru, Çagri S. & Thanopoulos, Athanasios C., 2008. "Social security and self control preferences," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 757-778, March.
- DeJong, David N. & Ripoll, Marla, 2007. "Do self-control preferences help explain the puzzling behavior of asset prices?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1035-1050, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.