Online Appendix to Should the Social Security Trust Fund hold Equities? An Intergenerational Welfare Analysis
AbstractIn a stochastic economy with overlapping generations, fiscal policy affects the allocation of aggregate risks. The paper shows how to compute the welfare effects of marginal policy changes that shift risk across cohorts, in general and for an application to social security equity investments. I estimate the relevant correlations between macroeconomic shocks and equity returns from 1874-1996 U.S. data, calibrate the model, and find positive welfare effects for equity investments. Since stock returns are positively correlated with social security's wage-indexed benefit obligations, equity investments would also help to stabilize the payroll tax rate. (Copyright: Academic Press)
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Bibliographic InfoPaper provided by Review of Economic Dynamics in its series Technical Appendices with number bohn99.
Length: 11 pages
Date of creation: Jul 1999
Date of revision:
Note: The original article was published in the Review of Economic Dynamics, volume 2 (July 1999), pages 666-697
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Other versions of this item:
- Henning Bohn, 1999. "Should the Social Security Trust Fund Hold Equities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 666-697, July.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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