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quantifying the inefficiency of the US social insurance system

  • Mark Huggett

    ()

    (Economics Department Georgetown University)

  • Jaun Carlos Parra

How far is the US social insurance system from an efficient system? We answer this question within a model where agents receive idiosyncratic, labor-productivity shocks that are privately observed. When social security and income taxation comprise the social insurance system, the maximum possible efficiency gain is equivalent to a $12.3$ percent increase in consumption. This occurs when labor productivity differences are set to the permanent differences estimated in US data.

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 55.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:55
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