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Social Security and personal saving: 1971 and beyond

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  • Philip Meguire

Abstract

Feldstein (1996, 1974) reported that Social Security in the U.S.A. reduced personal saving (“saving”) in 1992 (1971) by $416 ($61) billion. I reestimate his life-cycle consumption specification using data from the latest NIPA revision, correct his calculations, and find that the implied reduction in 1992 (1971) saving is now $280 ($22) billion, 48% (16%) of actual net private saving, with a standard error of $114 ($14) billion. If structural breaks around WWII and the 1972 Social Security amendments (which raised real per capita SSW by 22%) are allowed, and the market value of Treasury debt included in the specification, the reduction in 1971 and 1992 saving attributable to Social Security is at most 0.55 times its standard error, and 12% of net private saving. I then reestimate the preferred specification of Coates and Humphreys (1999), allowing for these structural breaks and relaxing other restrictions. The implied effect of Social Security on saving is again statistically zero. Copyright Springer-Verlag Berlin Heidelberg 2003

Suggested Citation

  • Philip Meguire, 2003. "Social Security and personal saving: 1971 and beyond," Empirical Economics, Springer, vol. 28(1), pages 115-139, January.
    • Handle: RePEc:spr:empeco:v:28:y:2003:i:1:p:115-139
    DOI: 10.1007/s001810100122
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    Cited by:

    1. Jia, Hongbo, 2017. "An evaluation of pension differentials between Chinese private and public sectors from perspective of protection and incentives over the lifecycle," China Economic Review, Elsevier, vol. 44(C), pages 16-29.

    More about this item

    Keywords

    Key words: Public pensions; Social Security; personal saving; aging population; life-cycle consumption function.; JEL classification: E2; E6; H3;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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