IDEAS home Printed from https://ideas.repec.org/p/cor/louvco/2000035.html
   My bibliography  Save this paper

Macroeconomic implications of switching the social security trust fund towards a greater investment in equities

Author

Listed:
  • PESTIEAU, Pierre
  • POSSEN, Uri

Abstract

This paper shows that shifting the portfolio allocation of the social security trust fund towards more equity investment, ceteris paribus,reduces the aggregate capital stock asw ell asthe average consumption level of all individuals except the poor retirees who receive an increase but at the cost of a large increase in uncertainty. If a larger capital stock is desired, reducing the supply of publicly supplied goods is the most effective tool. That change also increases the average private consumption of all the young and the wealthy retirees although it does reduce the average consumption and uncertainty of the old non-savers.

Suggested Citation

  • PESTIEAU, Pierre & POSSEN, Uri, 2000. "Macroeconomic implications of switching the social security trust fund towards a greater investment in equities," LIDAM Discussion Papers CORE 2000035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2000035
    as

    Download full text from publisher

    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2000.html
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael Dotsey, 1997. "Investing in equities: can it help social security?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 49-70.
    2. Henry J. Aaron & John B. Shoven, 1999. "Should the United States Privatize Social Security?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011743 edited by Benjamin M. Friedman, April.
    3. Pascal Belan & Pierre Pestieau, 1999. "Privatizing Social Security: A Critical Assessment," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 24(1), pages 114-130, January.
    4. Martin Feldstein & Andrew Samwick, 1998. "The Transition Path in Privatizing Social Security," NBER Chapters, in: Privatizing Social Security, pages 215-264, National Bureau of Economic Research, Inc.
    5. Pestieau, Pierre & Possen, Uri M., 2000. "Investing Social Security in the Equity Market. Does It Make a Difference?," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(1), pages 41-58, March.
    6. Laurence J. Kotlikoff, 1998. "Simulating the Privatization of Social Security in General Equilibrium," NBER Chapters, in: Privatizing Social Security, pages 265-311, National Bureau of Economic Research, Inc.
    7. Uri Possen & Steven Slutsky, 1980. "Public-Private Consumption Tradeoffs and the Balanced Budget Multiplier," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(4), pages 679-702.
    8. PESTIEAU, Pierre & POSSEN, Uri M., 2000. "Investing social security in the equity market. Does it make a difference?," LIDAM Reprints CORE 1444, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Pestieau, Pierre & Possen, Uri M., 2000. "Investing Social Security in the Equity Market. Does it Make a Difference?," National Tax Journal, National Tax Association, vol. 53(n. 1), pages 41-58, March.
    10. Narayana R. Kocherlakota, 1996. "The Equity Premium: It's Still a Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 42-71, March.
    11. Martin Feldstein, 1998. "Privatizing Social Security," NBER Books, National Bureau of Economic Research, Inc, number feld98-1.
    12. POSSEN, Uri & SLUTSKY, Steven, 1980. "Public-private consumption tradeoffs and the balanced budget multiplier," LIDAM Reprints CORE 430, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zohal Hessami, 2011. "What Determines Trust in International Organizations?," Working Paper Series of the Department of Economics, University of Konstanz 2011-44, Department of Economics, University of Konstanz.
    2. Hessami, Zohal, 2011. "What determines trust in international organizations? An empirical analysis for the IMF, the World Bank, and the WTO," MPRA Paper 34550, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Börsch-Supan, A. & Härtl, K. & Leite, D.N., 2016. "Social Security and Public Insurance," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 781-863, Elsevier.
    2. Börsch-Supan, Axel, 2002. "A Blue Print For Germany’s Pension Reform," MEA discussion paper series 02002, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    3. John Laitner, 2002. "Transition Paths and Social Security Reform," Working Papers wp025, University of Michigan, Michigan Retirement Research Center.
    4. Marko Köthenbürger & Panu Poutvaara, 2002. "Social Security Reform and Intergenerational Trade: Is there Scope for a Pareto-Improvement?," CESifo Working Paper Series 795, CESifo.
    5. Helmut Cremer & Pierre Pestieau, 1999. "Coping with the pension crisis: is it a demographic, financial or political problem?," CREPP Working Papers 9907, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    6. Martin Feldstein & Elena Ranguelova, 1998. "Individual Risk and Intergenerational Risk Sharing in an Investment-Based Social Security Program," NBER Working Papers 6839, National Bureau of Economic Research, Inc.
    7. Belan, Pascal & Pestieau, Pierre, 1999. "Privatisation des systèmes de retraite : une évaluation critique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 75(1), pages 9-27, mars-juin.
    8. Axel Börsch‐Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi‐Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    9. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    10. Börsch-Supan, Axel & Winter, Joachim, 1999. "Pension reform, savings behavior and corporate governance," Papers 99-48, Sonderforschungsbreich 504.
    11. Maen F. Nsour & Ph.D. & Samer AM Al-Rjoub & Ph.D., 2022. "How Would Investing in Equities Have Affected the Social Security Investment Fund in an Emerging Market? Can Governance Help?," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 55-72.
    12. Sergio Cesaratto, 2002. "The Economics of Pensions: A non-conventional approach," Review of Political Economy, Taylor & Francis Journals, vol. 14(2), pages 149-177.
    13. Hans Fehr & Christian Habermann & Fabian Kindermann, 2008. "Social Security with Rational and Hyperbolic Consumers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 884-903, October.
    14. Pascal Belan & Philippe Michel & Bertrand Wigniolle, 2007. "Capital Accumulation, Welfare, and the Emergence of Pension-Fund Activism," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 54-82, March.
    15. Le Blanc, Julia & Scholl, Almuth, 2017. "Optimal Savings For Retirement: The Role Of Individual Accounts," Macroeconomic Dynamics, Cambridge University Press, vol. 21(6), pages 1361-1388, September.
    16. Bertrand Wigniolle & Philippe Michel & Pascal Belan, 2002. "Pension funds and capital accumulation," Economics Bulletin, AccessEcon, vol. 4(1), pages 1-8.
    17. Mehdi Ben Braham, 2007. "Impact de l'introduction d'une dose de capitalisation en Tunisie : simulations à l'aide d'un modèle à générations imbriquées," Économie et Prévision, Programme National Persée, vol. 180(4), pages 189-199.
    18. Alain Jousten & Pierre Pestieau, 2002. "Labor Mobility, Redistribution, and Pension Reform in Europe," NBER Chapters, in: Social Security Pension Reform in Europe, pages 85-108, National Bureau of Economic Research, Inc.
    19. Le Blanc, Julia & Scholl, Almuth, 2011. "Optimal savings for retirement: The role of individual accounts and disaster expectations," Discussion Paper Series 1: Economic Studies 2011,33, Deutsche Bundesbank.
    20. Sergio Cesaratto, 2004. "The controversy over the US Social Security Surplus. A non conventional view," Department of Economics University of Siena 418, Department of Economics, University of Siena.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2000035. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alain GILLIS (email available below). General contact details of provider: https://edirc.repec.org/data/coreebe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.