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Quantifying the Inefficiency of the US Social Insurance System

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Abstract

How far is the US social insurance system from an efficient system? We answer this question within a model where agents receive idiosyncratic, labor-productivity shocks that are privately observed. When social security and income taxation comprise the social insurance system, the maximum possible e±ciency gain is equivalent to a 10:5 percent increase in consumption. This occurs when labor productivity diferences are set to the permanent diferences estimated in US data. Classification-JEL Codes: D80, D90, E21

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Paper provided by Georgetown University, Department of Economics in its series Working Papers with number gueconwpa~05-05-16.

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Date of creation: 16 May 2005
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Handle: RePEc:geo:guwopa:gueconwpa~05-05-16

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Postal: Georgetown University Department of Economics Washington, DC 20057-1036
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Web page: http://econ.georgetown.edu/

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Postal: Marcia Suss Administrative Officer Georgetown University Department of Economics Washington, DC 20057-1036
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Web: http://econ.georgetown.edu/

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Keywords: Social Security; Idiosyncratic Shocks; E±cient Allocations; Private Information;

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Cited by:
  1. Pricila Maziero & Laurence Ales, 2008. "Accounting for private information," Working Papers 663, Federal Reserve Bank of Minneapolis.

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