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The Impact of Social Security and Other Factors on the Distribution of Wealth

  • Gokhale, J.
  • Kotlikoff, L.J.

Auerbach et al. (1995), document the dramatic postwar increase in the annuitization of the resources of America's elderly. Gokhale et al. (1996) suggest that greater annuitization may explain the significant postwar rise in the consumption propensity of the elderly out of remaining lifetime resources. Gokhale et al. (2000) consider the related point that increased annuitization will reduce bequests, especially for lower and middle-income households, whose entire earnings are taxed under Social Security. By differentially disenfranchising the children of the poor from receipt of inheritances, Social Security may materially alter the distribution of wealth. This paper uses data from the PSID to further analyze how Social Security and other factors affect wealth inequality. The Gini coefficient of the simulated equilibrium wealth distribution is 21 percent larger and the share of wealth held by the wealthiest 1 percent of households is 79 percent higher in the presence of Social Security.

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Paper provided by London School of Economics - Centre for Labour Economics in its series Papers with number 9913.

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Length: 35 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:lseple:9913
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LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE, CENTER FOR LABOUR ECONOMICS, HOUGHTON STREET LONDON WC2A 2AE ENGLAND.

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Web page: http://www.lse.ac.uk/

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