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Quantifying the Inefficiency of the US Social Insurance System

How far is the US social insurance system from an efficient system? We answer this question within a model where agents receive idiosyncratic, labor-productivity shocks that are privately observed. When social security and income taxation comprise the social insurance system, the maximum possible efficiency gain is equivalent to a 10:5 percent increase in consumption. This occurs when labor productivity diferences are set to the permanent diferences estimated in US data.

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Paper provided by Georgetown University, Department of Economics in its series Working Papers with number gueconwpa~05-05-16.

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Date of creation: 16 May 2005
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Handle: RePEc:geo:guwopa:gueconwpa~05-05-16
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Georgetown University Department of Economics Washington, DC 20057-1036

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