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Distributional Effects of Social Security: the Notch Issue Revisited


  • James E. Duggan

    (Office of Economic Policy, U.S. Department of the Treasury)

  • Robert Gillingham

    (Office of Economic Policy, U.S. Department of the Treasury)

  • John S. Greenlees

    (Office of Prices and Living Conditions, U.S. Bureau of Labor Statistics)


This article provides the first empirical estimates of the effects of the Social Security Abstract benefit notch on lifetime benefits based on actual Social Security records, the 1988 Continuous Work History Sample. The authors'results show that the notch occurred in the context of a maturing social insurance system in which all early cohorts have received very high rates of return. As a group, the 1917-1921 notch cohorts could expect to receive roughly $500 billion (in 1988 dollars) more than if they were paid the same rate of return on their contnbutions that the Social Security system earns on its investedfunds.

Suggested Citation

  • James E. Duggan & Robert Gillingham & John S. Greenlees, 1996. "Distributional Effects of Social Security: the Notch Issue Revisited," Public Finance Review, , vol. 24(3), pages 349-370, July.
  • Handle: RePEc:sae:pubfin:v:24:y:1996:i:3:p:349-370

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    References listed on IDEAS

    1. Robert P. Inman, 1987. "Federal Assistance and Local Services in the United States: The Evolution of a New Federalist Fiscal Order," NBER Working Papers 2283, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Lovell, Michael C., 2009. "Social Security's Five OASI Inflation Indexing Problems," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-41.
    2. Matthias Doepke, "undated". "Inflation as a Redistribution Shock: Effects on Aggregates and Welfare," UCLA Economics Online Papers 412, UCLA Department of Economics.
    3. Matthias Doepke & Martin Schneider, 2005. "Real effects of inflation through the redistribution of nominal wealth," Staff Report 355, Federal Reserve Bank of Minneapolis.

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