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Is Social Security behind the Collapse of Personal Saving?

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  • Frank N. Caliendo

Abstract

This paper considers the quantitative role of growth in the size of the social security program in contributing to the collapse of personal saving in the U.S. over the last few decades. Using a calibrated, general equilibrium life-cycle model this paper shows that social security may not be to blame. Specifically, the model predicts that a 50-percent increase in the social security tax rate (as in the U.S. over the last half century) produces a modest decline in the personal saving rate from 10 percent down to 9.6 percent. This result runs counter to some popular opinion.

Suggested Citation

  • Frank N. Caliendo, 2009. "Is Social Security behind the Collapse of Personal Saving?," CESifo Working Paper Series 2746, CESifo.
    • Handle: RePEc:ces:ceswps:_2746
    as

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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp2746.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    NIPA personal saving rate; social security; life-cycle permanent-income model; general equilibrium calibration;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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