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A primer on social security systems and reforms

Author

Listed:
  • 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, vol. 93(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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    2. Julián Díaz-Saavedra & Ramon Marimon & João Brogueira de, 2023. "A Worker’s Backpack as an Alternative to PAYG Pension Systems," Journal of the European Economic Association, European Economic Association, vol. 21(5), pages 1944-1993.
    3. Díaz-Giménez, Javier & Díaz-Saavedra, Julián, 2025. "Public pensions reforms: Financial and political sustainability," European Economic Review, Elsevier, vol. 175(C).

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