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Privatizing Social Security in the U.S. -- Comparing the Options

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Author Info
Laurence J. Kotlikoff (NBER and Department of Economics, Boston University)
Kent Smetters (Wharton School, University of Pennsylvania)
Jan Walliser (International Monetary Fund)

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Abstract

This paper uses a new version of the Auerbach-Kotlikoff model to consider alternative ways to privatize the U.S. Social Security system. The new model incorporates intra- and intergenerational heterogeneity and is closely calibrated to U.S. fiscal institutions. Three privatization issues are considered: financing the transition, participation rules, and progressivity. As shown, Social Security's privatization can substantially raise long-run living standards. But these gains come at the cost of welfare losses to transition generations and take a long time to materialize. The long-run poor have much to gain from privatization even absent an explicit redistribution mechanism. Finally, privatizations that give initial workers the option of remaining in the current system have particularly low transition costs and particularly favorable macroeconomic consequences. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1999.0068
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 2 (1999)
Issue (Month): 3 (July)
Pages: 532-574
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Handle: RePEc:red:issued:v:2:y:1999:i:3:p:532-574

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Find related papers by JEL classification:
D9 - Microeconomics - - Intertemporal Choice and Growth
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

References listed on IDEAS
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  1. Samwick, Andrew A., 1998. "Discount rate heterogeneity and social security reform," Journal of Development Economics, Elsevier, vol. 57(1), pages 117-146, October. [Downloadable!] (restricted)
    Other versions:
  2. Laurence J. Kotlikoff & Kent A. Smetters & Jan Walliser, 1998. "Social Security: Privatization and Progressivity," NBER Working Papers 6428, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1995. "A Life Cycle Analysis of Social Security," Economic Theory, Springer, vol. 6(1), pages 83-114, June.
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Cited by:
(explanations, 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.)

  1. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take Us to Dinner? – Simulating the Transition Paths of the U.S., EU, Japan, and China," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-009, Boston University - Department of Economics. [Downloadable!]
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  2. Orazio Attanasio & Sagiri Kitao & Giovanni L. Violante, 2006. "Quantifying the Effects of the Demographic Transition in Developing Economies," Advances in Macroeconomics, Berkeley Electronic Press, vol. 6(1), pages 1298-1298. [Downloadable!] (restricted)
  3. Gary D. Hansen, . "Consumption over the Life Cycle: The Role of Annuities (with Selo Imrohoroglu)," UCLA Economics Online Papers 417, UCLA Department of Economics. [Downloadable!]
  4. Marco Cagetti & Mariacristina De Nardi, 2004. "Taxation, entrepreneurship and wealth," Working Papers 632, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  5. André Silva, 2008. "Taxes and labor supply: Portugal, Europe, and the United States," Portuguese Economic Journal, Springer, vol. 7(2), pages 101-124, August. [Downloadable!] (restricted)
  6. Florian Heiss & Alexander Ludwig & Joachim Winter, 2002. "Pension reform, capital markets, and the rate of return," MEA discussion paper series 02023, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
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  7. Simon Gilchrist & Fabio M. Natalucci & Egon Zakrajsek, 2007. "Investment and the Cost of Capital: New Evidence from the Corporate Bond Market," Boston University - Department of Economics - Working Papers Series WP2007-027, Boston University - Department of Economics. [Downloadable!]
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  8. Gary Hansen & Selahattin Imrohoroglu, 2008. "Consumption over the Life Cycle: The Role of Annuities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 566-583, July. [Downloadable!] (restricted)
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  9. Börsch-Supan, Axel, 2004. "GLOBAL AGING - Issues, Answers, More Questions," Sonderforschungsbereich 504 Publications 07-28, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  10. Mariacristina De Nardi & Selahattin Imrohoglu & Thomas J. Sargent, 1998. "Projected U.S. demographics and social security," Working Paper Series WP-98-14, Federal Reserve Bank of Chicago. [Downloadable!]
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  11. Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Simulating the Dynamic Macroeconomic and Microeconomic Effects of the FairTax," NBER Working Papers 11858, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Alexander Ludwig, 2005. "Aging and Economic Growth: The Role of Factor Markets and of Fundamental Pension Reforms," MEA discussion paper series 05094, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
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  13. Mario Catalán & Jaime Guajardo & Alexander W. Hoffmaister, 2007. "Coping with Spain's Aging: Retirement Rules and Incentives," IMF Working Papers 07/122, International Monetary Fund. [Downloadable!]
  14. Marco Cagetti & Mariacristina De Nardi, 2007. "Estate taxation, entrepreneurship, and wealth," Working Paper Series WP-07-08, Federal Reserve Bank of Chicago. [Downloadable!]
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  15. Mariacristina De Nardi, 2002. "Wealth inequality and intergenerational links," Staff Report 314, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  16. Alexander Ludwig & Joachim Winter, 2003. "Aging, pension reform, and capital flows: A multi-country simulation model," MEA discussion paper series 03028, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
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