Limited computational ability and social security
We revisit the role of social security in countering inadequate saving for retirement. We compute the optimal social security tax rate for households who lack the computational ability to solve dynamic optimization problems. Instead, they follow the simple rule of thumb of consuming and saving a fixed fraction of disposable income. This departs from the tradition of computing the optimal tax rate when households suffer from some type of behavioral bias yet possess the ability to solve dynamic optimization problems. Our general equilibrium model is calibrated to the moments of the distribution of saving rates in the US, and our results are generally supportive of a social security program as large as the one in the US. Copyright Springer Science+Business Media, LLC 2013
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004.
"Do the Rich Save More?,"
Journal of Political Economy,
University of Chicago Press, vol. 112(2), pages 397-444, April.
- Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2000. "Do the Rich Save More?," NBER Working Papers 7906, National Bureau of Economic Research, Inc.
- Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2000. "Do the rich save more?," Finance and Economics Discussion Series 2000-52, Board of Governors of the Federal Reserve System (U.S.).
- Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2007.
"Accounting for changes in the homeownership rate,"
FRB Atlanta Working Paper No.
2007-21, Federal Reserve Bank of Atlanta.
- Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2009. "Accounting For Changes In The Homeownership Rate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 677-726, 08.
- Matthew Chambers & Carlos Garriga & Don Schlagenhauf, 2007. "Accounting for changes in the homeownership rate," Working Papers 2007-034, Federal Reserve Bank of St. Louis.
- Yoshiro Miwa & Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2004. "Accounting for Changes in the Homeownership Rate," CIRJE F-Series CIRJE-F-312, CIRJE, Faculty of Economics, University of Tokyo.
- Matthew Chambers & Carlos Garriga, 2005. "Accounting for Changes in the Homeownership Rate," Computing in Economics and Finance 2005 304, Society for Computational Economics.
- Thaler, Richard H, 1994. "Psychology and Savings Policies," American Economic Review, American Economic Association, vol. 84(2), pages 186-92, May.
- CREMER, Helmuth & PESTIEAU, Pierre, .
"Myopia, redistribution and pensions,"
CORE Discussion Papers RP
2269, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- T. Findley & Frank Caliendo, 2009. "Short horizons, time inconsistency, and optimal social security," International Tax and Public Finance, Springer, vol. 16(4), pages 487-513, August.
- Laurence J. Kotlikoff & Lawrence H. Summers, 1981.
"The Adequacy of Savings,"
NBER Working Papers
0627, National Bureau of Economic Research, Inc.
- Frank N. Caliendo & Emin Gahramanov, 2008. "Hunting the Unobservables for Optimal Social Security: A General Equilibrium Approach," Economics Series 2008_10, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
- Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 2000.
"Time inconsistent preferences and Social Security,"
Discussion Paper / Institute for Empirical Macroeconomics
136, Federal Reserve Bank of Minneapolis.
- Martin Feldstein, 1982.
"The Optimal Level of Social Security Benefits,"
NBER Working Papers
0970, National Bureau of Economic Research, Inc.
- John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
- Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
- Kevin X. D. Huang & Frank Caliendo, 2011.
"Rationalizing Multiple Consumption-Saving Puzzles in a Unified Framework,"
Frontiers of Economics in China,
Higher Education Press, vol. 6(3), pages 359-388, September.
- Kevin Huang & Frank Caliendo, 2011. "Rationalizing multiple consumption-saving puzzles in a unified framework," Frontiers of Economics in China, Springer, vol. 6(3), pages 359-388, September.
- Kumru, Çagri S. & Thanopoulos, Athanasios C., 2008. "Social security and self control preferences," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 757-778, March.
- Bucciol, Alessandro, 2011. "A Note On Social Security Welfare With Self-Control Problems," Macroeconomic Dynamics, Cambridge University Press, vol. 15(04), pages 579-594, September.
When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:20:y:2013:i:3:p:414-433. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.