IDEAS home Printed from https://ideas.repec.org/p/hka/wpaper/2025-012.html

Redistribution, Distortions, and the Welfare Effects of Social Security

Author

Listed:
  • Youngsoo Jang

    (University of Queensland)

  • Svetlana Pashchenko

    (University of Georgia)

  • Ponpoje Porapakkarm

    (National Graduate Institute for Policy Studies)

Abstract

What is the best way to reform Social Security? Academic literature offers diverging advice. There is a well-known result that the optimal size of Social Security is zero, implying it is best to phase the program out. Other studies argue that much can be gained by redesigning the program, given its current size. We provide a unified analysis that examines how the optimal size of Social Security depends on the key features of its design. We first develop a theoretical decomposition tracing the program's welfare effects to (i) income redistribution, (ii) distortions on the annuitization level, and (iii) intertemporal distortions. We then quantitatively assess the role of these channels. We show that the zero-optimal-size result arises because Social Security is too distortive and not redistributive enough. Once these design flaws are corrected, it is even optimal to increase the size of the program.

Suggested Citation

  • Youngsoo Jang & Svetlana Pashchenko & Ponpoje Porapakkarm, 2026. "Redistribution, Distortions, and the Welfare Effects of Social Security," Working Papers 2025-012, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2025-012
    Note: M
    as

    Download full text from publisher

    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Jang_Pashchenko_Porapakkarm_2025_resdistr_distor_welfare-eff_SS.pdf
    File Function: First version, October 13, 2025
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hka:wpaper:2025-012. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jennifer Pachon (email available below). General contact details of provider: https://edirc.repec.org/data/mfichus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.