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Social Security in Theory and Practice (II): Efficiency Theories, Narrative Theories, and Implications for Reform

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Author Info
Casey B. Mulligan
Xavier Sala-i-Martin

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Abstract

166 countries have some kind of public old age pension. What economic forces create and sustain old age Social Security as a public program? Mulligan and Sala-i-Martin (1999) document several of the internationally and historically common features of social security programs, and explore political' theories of Social Security. This paper discusses the efficiency theories,' which view creation of the SS program as a full or partial solution to some market failure. Efficiency explanations of social security include the SS as welfare for the elderly', the retirement increases productivity to optimally manage human capital externalities', optimal retirement insurance', the prodigal father problem', the misguided Keynesian', the optimal longevity insurance', the government economizing transaction costs' and the return on human capital investment'. We also analyze four narrative' theories of social security: the chain letter theory', the lump of labor theory', the monopoly capitalism theory', and the Sub-but-Nearly-Optimal policy response to private pensions theory'. The political and efficiency explanations are compared with the international and historical facts and used to derive implications for replacing the typical pay-as-you-go system with a forced savings plan. Most of the explanations suggest that forced savings does not increase welfare, and may decrease it.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7119.

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Date of creation: May 1999
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Handle: RePEc:nbr:nberwo:7119

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation

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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. Casey B. Mulligan, 2000. "Can Monopoly Unionism Explain Publicly Induced Retirement?," NBER Working Papers 7680, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Jakob von Weizsaecker, 2003. "The Hayek Pension: An efficient minimum pension to complement the welfare state," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  3. Casey B. Mulligan & Xavier Sala-i-Martín, 2003. "Social Security, Retirement, and the Single-Mindedness of the Electorate," Economics Working Papers 686, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  4. Gilad Sorek, 2006. "Advancing Medical Technology, Aging Population, and Economic Growth," DEGIT Conference Papers c011_046, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  5. Canegrati, Emanuele, 2007. "On redistribution effects of public debt amongst single-minded generations," MPRA Paper 2254, University Library of Munich, Germany. [Downloadable!]
  6. Canegrati, Emanuele, 2006. "The Single-Mindedness Theory: Micro-foundation and Applications to Social Security Systems," MPRA Paper 1223, University Library of Munich, Germany, revised Jun 2007. [Downloadable!]
  7. Mikhail Golosov & Aleh Tsyvinski, 2004. "Designing Optimal Disability Insurance: A Case for Asset Testing," NBER Working Papers 10792, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Homburg, Stefan, 2004. "Coping With Rational Prodigals: A Theory Of Social Security And Savings Subsidies," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-293, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
    Other versions:
  9. Emanuele, Canegrati, 2007. "A Single-Mindedness model with n generations," MPRA Paper 2548, University Library of Munich, Germany. [Downloadable!]
  10. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Gerontocracy, Retirement, and Social Security," Economics Working Papers 383, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  11. Juan F. Jimeno, . "Incentivos y desigualdad en el sistema español de pensiones contributivas de jubilación," Working Papers 2002-13, FEDEA. [Downloadable!]
  12. Mikhail Golosov & Narayana Kocherlakota & Aleh Tsyvinski, 2001. "Optimal indirect and capital taxation," Staff Report 293, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  13. Federico Foders, 2000. "Demographie und Bildung: Gehen uns die Qualifizierten aus? Auswirkungen der Bevölkerungsentwicklung auf das deutsche Bildungssystem," Kiel Working Papers 1003, Kiel Institute for the World Economy. [Downloadable!]
  14. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Social Security in Theory and Practice (I): Facts and Political Theories," Economics Working Papers 384, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
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