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Social Security and Trust Fund Management

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  • Takashi Oshio

Abstract

In this paper we investigate why and to what extent the government should have a social security trust fund, and how it should manage the fund in the face of demographic shocks, based on a simple overlapping-generations model. We show that, given an aging population, a trust fund in some form could achieve the (modified) golden rule or to offset the negative income effect of a PAYGO system. Besides, in a closed economy where factor-prices effects dominate, using the trust fund as a buffer for demographic shocks could lead to a widening of intergenerational inequality. We also the discuss policy implications of our analysis on the social security reform debate in Japan, including the fixed tax method and the use of the trust fund in the face of a rapidly aging population.

Suggested Citation

  • Takashi Oshio, 2004. "Social Security and Trust Fund Management," NBER Working Papers 10444, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10444
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    References listed on IDEAS

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    1. John B. Shoven, 2000. "Administrative Aspects of Investment-Based Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number shov00-1.
    2. Andrew B. Abel, 2001. "The Social Security Trust Fund, the Riskless Interest Rate, and Capital Accumulation," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 153-202, National Bureau of Economic Research, Inc.
    3. Henning Bohn, 2001. "Social Security and Demographic Uncertainty: The Risk-Sharing Properties of Alternative Policies," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 203-246, National Bureau of Economic Research, Inc.
    4. Kent Smetters, 2003. "Is the Social Security Trust Fund Worth Anything?," NBER Working Papers 9845, National Bureau of Economic Research, Inc.
    5. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, October.
    6. Smith, Alasdair, 1982. "Intergenerational transfers as social insurance," Journal of Public Economics, Elsevier, vol. 19(1), pages 97-106, October.
    7. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    8. John B. Shoven, 2000. "Introduction to "Administrative Aspects of Investment-Based Social Security Reform"," NBER Chapters, in: Administrative Aspects of Investment-Based Social Security Reform, pages 1-8, National Bureau of Economic Research, Inc.
    9. Kato, Ryuta, 1998. "Transition to an Aging Japan: Public Pension, Savings, and Capital Taxation," Journal of the Japanese and International Economies, Elsevier, vol. 12(3), pages 204-231, September.
    10. Burbidge, John B., 1983. "Social security and savings plans in overlapping-generations models," Journal of Public Economics, Elsevier, vol. 21(1), pages 79-92, June.
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    Cited by:

    1. Olivia S. Mitchell & John Piggott & Cagri Kumru, 2008. "Managing Public Investment Funds: Best Practices and New Challenges," NBER Working Papers 14078, National Bureau of Economic Research, Inc.
    2. Gahramanov, Emin & Tang, Xueli, 2013. "A mixed blessing of lifespan heterogeneity," Journal of the Japanese and International Economies, Elsevier, vol. 29(C), pages 142-153.

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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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