Is altruism important for understanding the long-run effects of social security?
AbstractThis paper quantifies the effects of social security on capital accumulation and wealth distribution in a life cycle framework with altruistic individuals. The main findings of this paper are that the current U.S. social security system has a significant impact on capital accumulation and wealth distribution. I find that social security crowds out 8\% of the capital stock of an economy without social security. This effect is driven by the distortions of labor supply due to the taxation of labor income rather than by the intergenerational redistribution of income imposed by the social security system. In contrast to previous analysis of social security, I found that social security does not affect the savings rate of the economy. Another interesting finding is that even though the current U.S. social security system is progressive in its benefits, it may lead to a more disperse distribution of wealth.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 234.
Date of creation: Sep 1997
Date of revision:
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Web page: http://www.econ.upf.edu/
Social security; capital accumulation; altruism; wealth distribution;
Other versions of this item:
- Luisa Fuster, 1999. "Is Altruism Important for Understanding the Long-Run Effects of Social Security?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 616-637, 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
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-09-14 (All new papers)
- NEP-CDM-1998-09-14 (Collective Decision-Making)
- NEP-DGE-1998-09-14 (Dynamic General Equilibrium)
- NEP-PBE-1998-09-14 (Public Economics)
- NEP-PUB-1998-09-14 (Public Finance)
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