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A primer on social security systems and reforms

  • Craig P. Aubuchon
  • Juan Carlos Conesa
  • Carlos Garriga

This article reviews the characteristics of different social security systems. Many configurations arise depending on the nature of a system’s funding and determination of benefits. Many reforms propose changing the U.S. Social Security system. The authors focus their analysis of the transition from a pay-as-you-go to a fully funded system. They argue that the key component of any reform is the treatment of the implicit liabilities of a country’s social security system. The welfare gains accruing to some cohorts as a result of such reforms usually stem from either a partial or complete default on the implicit debt of the system, and in that sense the gains imply only a redistribution of welfare across agents. In contrast, the elimination of existing distortions in social security financing can generate efficiency gains, allowing for welfare improvements for all agents. This result shifts the focus from the nature of the system itself and centers the debate on the distortions associated with social security financing.

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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2011)
Issue (Month): Jan ()
Pages: 19-35

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Handle: RePEc:fip:fedlrv:y:2011:i:jan:p:19-35:n:v.93no.1
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  1. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
  2. Andrea Butelmann & Francisco Gallego, 2000. "Household Saving in Chile: Microeconomic Evidence," Working Papers Central Bank of Chile 63, Central Bank of Chile.
  3. Richard Disney & Carl Emmerson & Sarah Smith, 2003. "Pension Reform and Economic Performance in Britain in the 1980s and 1990s," NBER Working Papers 9556, National Bureau of Economic Research, Inc.
  4. Juan Carlos Conesa & Carlos Garriga, 2007. "Optimal response to a transitory demographic shock in Social Security financing," Working Papers 2007-041, Federal Reserve Bank of St. Louis.
  5. Michael Pakko, 2009. "Deficits, debt and looming disaster : reform of entitlement programs may be the only hope," The Regional Economist, Federal Reserve Bank of St. Louis, issue Jan, pages 4-9.
  6. Juan Carlos Conesa & Carlos Garriga, 2007. "Optimal fiscal policy in the design of Social Security reforms," Working Papers 2007-035, Federal Reserve Bank of St. Louis.
  7. Rowena A. Pecchenino & Patricia S. Pollard, 1998. "Reforming Social Security: a welfare analysis," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 19-30.
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