The Marginal Value of Social Security
If annuities such as Social Security are not chosen freely, the consumption path typically cannot be determined independently of the path of annuities. This constraint reduces the value of the annuity from the point of view of the annuitant. I measure the value of the annuity by the marginal rate of substitution (MRS), the amount of bequeathable wealth that will substitute for a dollar of annuity wealth. In the analytical section of the paper, I show that the MRS increases as bequeathable wealth increases; in that sense the wealthy benefit more from Social Security than the poor. In the empirical section, I estimate the MRS for a sample of retired single elderly. The MRS varies considerably from individual to individual because of differences in the mix of bequeathable wealth and annuities. For the parameter values that best fit the data, a substantial fraction of the sample has more Social Security than it would like in that it would be willing to trade, at the margin, a claim to Social Security for an increase in bequeathable wealth.
|Date of creation:||Oct 1987|
|Date of revision:|
|Publication status:||published as (With Michael J. Boskin) Published as "The Effect of Social Security on Retirement in the Early 1970's", Quarterly Journal of Economics, Vol. 99,no. 4 (1984): 767-790.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- B. Douglas Bernheim, 1984.
"Dissaving After Retirement: Testing the Pure Life Cycle Hypothesis,"
NBER Working Papers
1409, National Bureau of Economic Research, Inc.
- B. Douglas Bernheim, 1987. "Dissaving after Retirement: Testing the Pure Life Cycle Hypothesis," NBER Chapters, in: Issues in Pension Economics, pages 237-280 National Bureau of Economic Research, Inc.
- Michael D. Hurd & John B. Shoven, 1982.
"The Economic Status of the Elderly,"
NBER Working Papers
0914, National Bureau of Economic Research, Inc.
- Zvi Bodie & John B. Shoven & David A. Wise, 1987. "Issues in Pension Economics," NBER Books, National Bureau of Economic Research, Inc, number bodi87-1.
- R. Glenn Hubbard, 1984. "Uncertain Lifetimes, Pensions, and Individual Saving," NBER Working Papers 1363, National Bureau of Economic Research, Inc.
- Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1.
- Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
- Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, vol. 77(3), pages 298-312, June.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2411. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.