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A primer on social security systems and reforms

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

Abstract

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.

Suggested Citation

  • Craig P. Aubuchon & Juan Carlos Conesa & Carlos Garriga, 2011. "A primer on social security systems and reforms," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 19-35.
  • Handle: RePEc:fip:fedlrv:y:2011:i:jan:p:19-35:n:v.93no.1
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    References listed on IDEAS

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    1. Michael R. 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.
    2. Juan Carlos Conesa & Carlos Garriga, 2009. "Optimal response to a transitory demographic shock in Social Security financing," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 33-48.
    3. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
    4. Juan C. Conesa & Carlos Garriga, 2008. "Optimal Fiscal Policy In The Design Of Social Security Reforms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 291-318, February.
    5. Andrea Butelmann P & Francisco Gallego, 2000. "Household Saving in Chile: Microeconomic Evidence," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 3(1), pages 5-24, April.
    6. Richard Disney & Carl Emmerson & Sarah Smith, 2004. "Pension Reform and Economic Performance in Britain in the 1980s and 1990s," NBER Chapters,in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 233-274 National Bureau of Economic Research, Inc.
    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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    Keywords

    Social security;

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