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An Evaluation of the Role of Factor Markets and Intensities in the Social Security Crisis: A Progress Report

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  • John B. Shoven

Abstract

This paper begins to evaluate some of the complicated set of economic adjustments which are going to occur as the uneven population age structure of the U.S. matures. It argues that in the 2012-2035 "crunch" years for the social security system not only will workers be scarce relative to retirees, but they will also be scarce relative to capital. This fact will tend to raise the wage-rentals ratio and partially alleviate the problems of a retirement plan supported by taxes on labor income. On the other hand, during this period the large number of elderly persons will be attempting to dis-save by selling their assets to the relatively few younger, accumulating families. Such an imbalance will be equilibrated only by depressed asset prices. The conclusion, thus, is that the problems of the social security system may be partially alleviated by factor price adjustments, while private funded pension plans will have a problem of their own, namely lower than anticipated liquidation values.

Suggested Citation

  • John B. Shoven, 1977. "An Evaluation of the Role of Factor Markets and Intensities in the Social Security Crisis: A Progress Report," NBER Working Papers 0216, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0216
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    1. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "General Equilibrium Analysis of Tax Policies," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 6-24, National Bureau of Economic Research, Inc.
    2. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66(6), pages 467-467.
    3. Feldstein, Martin S, 1976. "Social Security and Saving: The Extended Life Cycle Theory," American Economic Review, American Economic Association, vol. 66(2), pages 77-86, May.
    4. John B. Shoven & John Whalley, 1973. "General Equilibrium with Taxes: A Computational Procedure and an Existence Proof," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(4), pages 475-489.
    5. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    6. Michael J. Boskin, 1976. "Taxation, Saving and the Rate of Interest," NBER Working Papers 0135, National Bureau of Economic Research, Inc.
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