The Effect of Social Security on Saving
This paper, which was presented as the 1979 Frank Paish Lecture to the British Association of University Teachers of Economics, provides a non-technical summary of the recent studies of the effects of social security on private saving. The first section discusses the theoretical indeterminacy of the effect of social security while the second part reviews the empirical studies. Although the traditional life cycle theory of saving clearly implies that the anticipation of social security benefits reduces private saving, a richer theoretical framework suggests several reasons why the saving response cannot be unambiguously established by theoretical reasoning. These reasons include the indirect effects of social security on retirement behavior, private pensions, and gifts and bequests. The econometric studies resolve this uncertainty and indicate that social security appears to reduce private saving substantially. These studies include(1) aggregate time series evidence on the U.S. saving rates over the past 50 years, (2) microeconomic evidence on the accumulation of wealth by a large sample of individual households, and (3) international comparisons of saving rates in major industrial countries.
|Date of creation:||Apr 1979|
|Date of revision:|
|Publication status:||published as Feldstein, Martin. "The Effect Of Social Security On Saving," Geneva Papers on Risk and Insurance Theory, 1980, v5(15), 4-17.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
- Oldfield, George S, Jr, 1977. "Financial Aspects of the Private Pension System," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(1), pages 48-54, February.
- Feldstein, Martin & Horioka, Charles, 1980.
"Domestic Saving and International Capital Flows,"
Royal Economic Society, vol. 90(358), pages 314-29, June.
- Kochin, Levis A, 1974. "Are Future Taxes Anticipated by Consumers? Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(3), pages 385-94, August.
- 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, pages 467.
- Feldstein, Martin & Pellechio, Anthony, 1979. "Social Security and Household Wealth Accumulation: New Microeconometric Evidence," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 361-68, August.
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