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Transition to a Fully Funded Pension System: Five Economic Issues

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Author Info
Martin Feldstein

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Abstract

This paper provides a relatively nontechnical discussion of the effects of shifting from a pay-as-you-go system of Social Security pensions to a fully funded plan based on individual accounts. The analysis discusses the rationale for such a shift and deals with five common problems: (1) the nature of the transition path; (2) the effect of the shift on national saving and capital accumulation; (3) the rate of return that such accounts would earn; (4) the risks of unfunded and funded systems; and (5) the distributional effects of the shift.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6149.

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Date of creation: Aug 1997
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Handle: RePEc:nbr:nberwo:6149

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment

References listed on IDEAS
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.:

  1. Feldstein, Martin, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," American Economic Review, American Economic Association, vol. 86(2), pages 1-14, May.
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  2. Martin Feldstein & Charles Horioka, 1980. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Olivia S. Mitchell, 1996. "Administrative Costs in Public and Private Retirement Systems," NBER Working Papers 5734, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Michael Mussa & Morris Goldstein, 1993. "The Integration of World Capital Markets," IMF Working Papers 93/95, International Monetary Fund.
  5. Martin Feldstein & Andrew Samwick, 1996. "The Transition Path in Privatizing Social Security," NBER Working Papers 5761, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Olivia S. Mitchell & James M. Poterba & Mark J. Warshawsky, . "New Evidence on the Money's Worth of Individual Annuities," Pension Research Council Working Papers 97-9, Wharton School Pension Research Council, University of Pennsylvania.
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  7. Martin Feldstein & Philippe Bacchetta, 1991. "National Saving and International Investment," NBER Chapters, in: National Saving and Economic Performance, pages 201-226 National Bureau of Economic Research, Inc. [Downloadable!]
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  8. Laurence J. Kotlikoff, 1995. "Privatization of Social Security: How it Works and Why it Matters," Boston University - Institute for Economic Development 66, Boston University, Institute for Economic Development.
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  9. Michael Mussa & Morris Goldstein, 1993. "The integration of world capital markets," Proceedings, Federal Reserve Bank of Kansas City, pages 245-330.
  10. Martin Feldstein & Jeffrey B. Liebman, 2001. "Social Security," NBER Working Papers 8451, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    • Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier. [Downloadable!] (restricted)
  11. Martin Feldstein & Andrew Samwick, 1997. "The Economics of Prefunding Social Security and Medicare Benefits," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 115-164 National Bureau of Economic Research, Inc. [Downloadable!]
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Full references

Cited by:
(explanations, 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.)

  1. Laurence J. Kotlikoff & Kent Smetters & Jan Walliser, 2001. "Finding a Way Out of America's Demographic Dilemma," NBER Working Papers 8258, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. John Genakoplos & Olivia S. Mitchell & Stephen P. Zeldes, 2000. "Would a Privatized Social Security System Really Pay a Higher Rate of Return," NBER Working Papers 6713, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Lee, Ronald & Mason, Andrew & Miller, Timothy, 2000. "From Transfers to Individual Responsibility: Implications for Savings and Capital Accumulation in Taiwan and the United States," Arbetsrapport 2000:3, Institute for Futures Studies. [Downloadable!]
  4. Svend E. Hougaard Jensen & Jukka Lassila, 2002. "Reforming Social Security in a Transition Economy: The Case of Lithuania," Journal of Policy Reform, Taylor and Francis Journals, vol. 5(1), pages 17-36, January. [Downloadable!] (restricted)
  5. Lorenzo Forni & Raffaela Giordano, 2001. "Funding a PAYG pension system: the case of Italy," Fiscal Studies, Institute for Fiscal Studies, vol. 22(4), pages 487-526., December. [Downloadable!]
  6. Carlos Garriga, 2005. "Un análisis de equilibrio general de dos propuestas de reforma de la seguridad social," Investigaciones Economicas, Fundación SEPI, vol. 29(1), pages 117-148, January. [Downloadable!]
  7. Juan Carlos Conesa & Carlos Garriga, 2000. "Reforma del sistema de seguridad social y adquisición de formación," Investigaciones Economicas, Fundación SEPI, vol. 24(2), pages 271-295, May. [Downloadable!]
    Other versions:
  8. John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, 2000. "Social Security Money's Worth," NBER Working Papers 6722, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. D'Amato, Marcello & Galasso, Vincenzo, 2002. "Aggregate Risk, Political Constraints and Social Security Design," CEPR Discussion Papers 3330, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  10. Hans-Werner Sinn, 2000. "Why a Funded Pension System is Needed and Why It is Not Needed," International Tax and Public Finance, Springer, vol. 7(4), pages 389-410, August. [Downloadable!] (restricted)
  11. Martin Feldstein & Elena Ranguelova, 1998. "Individual Risk and Intergenerational Risk Sharing in an Investment-Based Social Security Program," NBER Working Papers 6839, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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