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Privatizing Social Security

Author

Listed:
  • Thomas Cooley

    (University of Rochester)

  • Jorge Soares

    (George Washington University)

Abstract

This paper studies the political sustainability of the existing pay-as-you-go social security system in the face of recent demographic patterns. We analyze different approaches to privatizing the system and consider what it would require for them to be politically implementable. The analysis is based on an overlapping generations economy where an initial generation would choose to implement a pay-as-you-go social insurance system. We study the sustainability of this system in each subsequent period. We describe some transitions policies that make the current generations of agents at least as well off as the maintenance of the social security system. All feasible transition policies use debt to finance the benefits during the transition period shifting at least some of the cost to unborn generations. (Copyright: Elsevier)

Suggested Citation

  • Thomas Cooley & Jorge Soares, 1999. "Privatizing Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 731-755, July.
    • Handle: RePEc:red:issued:v:2:y:1999:i:3:p:731-755
    DOI: 10.1006/redy.1999.0069
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    References listed on IDEAS

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    1. TallariniJr., Thomas D., 2000. "Risk-sensitive real business cycles," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 507-532, June.
    2. David E. Altig & Jagadeesh Gokhale, 1997. "Social Security privatization: a simple proposal," Working Papers (Old Series) 9703, Federal Reserve Bank of Cleveland.
    3. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February.
    4. Joines, Douglas H, 1981. "Estimates of Effective Marginal Tax Rates on Factor Incomes," The Journal of Business, University of Chicago Press, vol. 54(2), pages 191-226, April.
    5. Lars Peter Hansen & Thomas J. Sargent, 1993. "Recursive linear models of dynamic economies," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
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