Optimal Design of Social Security Reforms
We argue that a privatization of the social security system, going from a Pay-As-You- Go to a Fully Funded system, can be interpreted as the explicit recognition of an implicit debt and there is no efficiency gain in doing so. As a consequence, potential efficiency gains upon reforming the system come from the elimination of distortions and the optimal management of that implicit debt. Based on that argument, this paper studies the optimal design of a social security privatization in a Pareto improving way. The government decides endogenously how to finance the transition and the welfare of the initial generations alive becomes policy constraint. We find that the government can design a Pareto improving reform that exhibits sizeable welfare gains, arising because of a reduction in labor supply distortions. In contrast, the welfare gain from reducing savings distortions is relatively small. Our approach explicitly provides quantitative policy prescriptions towards the policy design of future and maybe unavoidable social security reforms.
|Date of creation:||01 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Postal: 08193, Bellaterra, Barcelona|
Phone: 34 93 592 1203
Fax: +34 93 542-1223
Web page: http://pareto.uab.cat
More information through EDIRC
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.:
- Mariacristina De Nardi & Selahattin Imrohoroglu & Thomas J. Sargent, 1998.
"Projected U.S. demographics and social security,"
Working Paper Series
WP-98-14, Federal Reserve Bank of Chicago.
- Laurence J. Kotlikoff & Kent Smetters & Jan Walliser, 1999. "Privatizing Social Security in the U.S. -- Comparing the Options," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 532-574, July.
- Carlos Garriga-Calvet, 2000.
"Optimal Fiscal Policy in Overlapping Generations Models,"
Econometric Society World Congress 2000 Contributed Papers
1772, Econometric Society.
- Carlos Garriga, 2001. "Optimal Fiscal Policy in Overlapping Generations Models," Working Papers in Economics 66, Universitat de Barcelona. Espai de Recerca en Economia.
- Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February.
- Andres Erosa & Martin Gervais, 2000.
"Optimal taxation in life-cycle economies,"
00-02, Federal Reserve Bank of Richmond.
- Luisa Fuster, 1997.
"Is altruism important for understanding the long-run effects of social security?,"
Economics Working Papers
234, Department of Economics and Business, Universitat Pompeu Fabra.
- Luisa Fuster, 1999. "Is Altruism Important for Understanding the Long-Run Effects of Social Security?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 616-637, July.
- Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
- Boldrin, Michele & Montes, Ana, 2002.
"The Intergenerational State: Education and Pensions,"
CEPR Discussion Papers
3275, C.E.P.R. Discussion Papers.
- Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
- Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
- Douglas Gollin, 2001.
"Getting Income Shares Right,"
Department of Economics Working Papers
2001-11, Department of Economics, Williams College.
- Conesa, Juan Carlos & Garriga, Carlos, 2003. "Status Quo Problem In Social Security Reforms," Macroeconomic Dynamics, Cambridge University Press, vol. 7(05), pages 691-710, November.
- Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November.
- Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:aub:autbar:642.04. 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: (Xavier Vila)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.