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Social Security, Induced Retirement, and Aggregate Capital Accumulation:A Correction and Updating


  • Martin Feldstein


In a 1974 paper in the Journal of Political Economy I discussed the theoretical ambiguity of the effect of social security on private saving and presented statistical evidence that social security does on balance depress saving. Recently, an error was detected in the computer program that was used to construct the "social security wealth" variable. I have now corrected that error and re estimated the original consumer expenditure equation. I have also updated the analysis by including the five years of additional data that have become available since the original study was completed. The new estimates, presented in the current note, continue to indicate that social security substantially depresses private saving. The point estimates of this effect are somewhat lower than before but nevertheless simply that social security depresses saving by about fifty percent of its current value. The estimated reduction in saving is more than two-thirds of the concurrent "contributions" of employees and employers to the social security retirement and survivors fund.

Suggested Citation

  • Martin Feldstein, 1980. "Social Security, Induced Retirement, and Aggregate Capital Accumulation:A Correction and Updating," NBER Working Papers 0579, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0579
    Note: PE

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    References listed on IDEAS

    1. 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.
    2. Martin Feldstein, 1980. "International differences in social security and saving," NBER Chapters,in: Econometric Studies in Public Finance, pages 225-244 National Bureau of Economic Research, Inc.
    3. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
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    Cited by:

    1. Alan J. Auerbach & Laurence J. Kotlikoff, 1981. "An Examination of Empirical Tests of Social Security and Savings," NBER Working Papers 0730, National Bureau of Economic Research, Inc.
    2. Marc Robinson, 1983. "Social Security and Physical Capital: An Interpretation of the Evidence, Lessons and Outlook," UCLA Economics Working Papers 307, UCLA Department of Economics.
    3. Seng-Eun Choi, 2010. "Social Security and Household Saving in Korea: Evidence from the Household Income and Expenditure Survey," Korean Economic Review, Korean Economic Association, vol. 26, pages 97-119.

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