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Should Social Security Benefits Be Means Tested?

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  • Feldstein, Martin
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    Abstract

    Social-security retirement benefits distort the saving decisions of workers who are rational enough to save for their future. Since the implicit rate of return in an unfunded social-security program is less than the marginal product of capital, the resulting decline in saving causes a welfare loss. The present paper examines the conditions under which the welfare loss can be reduced by replacing the current universal social-security program with a means-tested program that pays benefits only to those individuals with little or no other retirement income or assets.

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    File URL: http://dash.harvard.edu/bitstream/handle/1/2770498/feldstein_socialsec.pdf
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    Bibliographic Info

    Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 2770498.

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    Date of creation: 1987
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    Publication status: Published in Journal of Political Economy
    Handle: RePEc:hrv:faseco:2770498

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    Cited by:
    1. David M. Cutler & Louise Sheiner, 1994. "Policy Options for Long-Term Care," NBER Chapters, in: Studies in the Economics of Aging, pages 395-442 National Bureau of Economic Research, Inc.
    2. Amihai Glazer & Charles Lave, 1994. "How Regulations Can Succeed Where Taxes Do Not: An Examination of Automobile Fuel Efficiency," Public Economics 9406002, EconWPA.
    3. Barrientos, Armando, 2012. "What is the Role of Social Pensions in Asia?," ADBI Working Papers 351, Asian Development Bank Institute.
    4. Andras Simonovits, 2009. "A Simple Model of Tax-Favored Retirement Accounts," IEHAS Discussion Papers 0915, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    5. Braun, R. Anton & Kopecky, Karen A. & Koreshkova, Tatyana, 2013. "Old, sick, alone, and poor: a welfare analysis of old-age social insurance programs," Working Paper 2013-02, Federal Reserve Bank of Atlanta.
    6. Simonovits, András, 2011. "When are voluntary pensions indifferent?," Economics Letters, Elsevier, vol. 111(2), pages 155-157, May.
    7. Simonovits, András, 2009. "Az önkéntes nyugdíjrendszer egy egyszerű modellje
      [A simple model of tax-favoured retirement accounts]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 851-865.
    8. Simonovits, András, 2008. "Keresetbevallás és nyugdíj - egy elemi modell
      [Reporting earnings and pension benefits: an elementary model]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 427-440.
    9. Martin Feldstein, 2005. "Rethinking Social Insurance," American Economic Review, American Economic Association, vol. 95(1), pages 1-24, March.
    10. David Neumark & Elizabeth Powers, 1996. "Consequences of means testing Social Security: evidence from the SSI program," Working Paper 9618, Federal Reserve Bank of Cleveland.
    11. Barrientos, Armando, 2011. "On the Distributional Implications of Social Protection Reforms in Latin America," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    12. Docquier, Frederic, 2002. "On the optimality of public pensions in an economy with life-cyclers and myopes," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 121-140, January.
    13. Richard Disney, 2005. "Household Saving Rates and the Design of Social Security Programmes: Evidence from a Country Panel," CESifo Working Paper Series 1541, CESifo Group Munich.
    14. Powers, Elizabeth T., 1998. "Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States," Journal of Public Economics, Elsevier, vol. 68(1), pages 33-53, April.
    15. repec:clg:wpaper:2011-02 is not listed on IDEAS
    16. Jakob von Weizsäcker, 2003. "The Hayek Pension: An efficient minimum pension to complement the welfare state," CESifo Working Paper Series 1064, CESifo Group Munich.
    17. Frank N. Caliendo, 2009. "Is Social Security behind the Collapse of Personal Saving?," CESifo Working Paper Series 2746, CESifo Group Munich.
    18. Sheiner, Louise, 1994. "Marginal Tax Rates and Health Care Reform," National Tax Journal, National Tax Association, vol. 47(3), pages 497-517, September.

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