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quantifying the inefficiency of the US social insurance system

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  • Mark Huggett

    (Economics Department Georgetown University)

  • Jaun Carlos Parra

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 efficiency gain is equivalent to a $12.3$ percent increase in consumption. This occurs when labor productivity differences are set to the permanent differences estimated in US data.

Suggested Citation

  • Mark Huggett & Jaun Carlos Parra, 2006. "quantifying the inefficiency of the US social insurance system," 2006 Meeting Papers 55, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:55
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    Cited by:

    1. Laurence Ales & Maziero Pricila, "undated". "Accounting for Private Information," GSIA Working Papers 2010-E58, Carnegie Mellon University, Tepper School of Business.

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    More about this item

    Keywords

    private information; efficient allocations; social security;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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