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Does Social Security Privatization Produce Efficiency Gains? Working Paper 2005-04

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  • Shinichi Nishiyama
  • Kent Smetters

Abstract

The economic literature shows that privatizing Social Security can improve labor supply incentives, but it can also reduce risk sharing when households face uninsurable risks. We simulate a stylized 50-percent privatization with transaction costs financed by consumption taxes and examined its impact on macroeconomic variables as well as on the welfare across generations and income classes. Our overlapping-generations model includes heterogeneous agents with elastic labor supply who face idiosyncratic earnings shocks and longevity uncertainty. The transition path is calculated, which allows us

Suggested Citation

  • Shinichi Nishiyama & Kent Smetters, 2005. "Does Social Security Privatization Produce Efficiency Gains? Working Paper 2005-04," Working Papers 16442, Congressional Budget Office.
  • Handle: RePEc:cbo:wpaper:16442
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    File URL: https://www.cbo.gov/sites/default/files/109th-congress-2005-2006/workingpaper/2005-04_0.pdf
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    References listed on IDEAS

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    1. Martin Floden & Jesper Lindé, 2001. "Idiosyncratic Risk in the United States and Sweden: Is There a Role for Government Insurance?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 406-437, July.
    2. 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.
    3. Gustman, Alan L. & Steinmeier, Thomas L., 2001. "How effective is redistribution under the social security benefit formula?," Journal of Public Economics, Elsevier, vol. 82(1), pages 1-28, October.
    4. Murphy, Kevin M & Welch, Finis, 1998. "Perspectives on the Social Security Crisis and Proposed Solutions," American Economic Review, American Economic Association, vol. 88(2), pages 142-150, May.
    5. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
    6. Shinichi Nishiyama, 2002. "Bequests, Inter Vivos Transfers, and Wealth Distribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 892-931, October.
    7. Robert J. Barro, 1997. "Macroeconomics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 0262024365, January.
    8. Mariger, Randall P., 1999. "Social Security Privatization: What Are the Issues?," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 783-802, December.
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    Cited by:

    1. Bagchi Shantanu, 2017. "Can removing the tax cap save Social Security?," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-28.
    2. Bagchi, Shantanu, 2015. "Labor supply and the optimality of Social Security," Journal of Economic Dynamics and Control, Elsevier, vol. 58(C), pages 167-185.

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