scholarly journals A historical welfare analysis of Social Security: Whom did the program benefit?

10.3982/qe657 ◽  
2019 ◽  
Vol 10 (4) ◽  
pp. 1357-1399 ◽  
Author(s):  
William B. Peterman ◽  
Kamila Sommer
Keyword(s):  
Life Cycle ◽  
Steady State ◽  
Social Security ◽  
Welfare Effects ◽  
Welfare Effect ◽  
Life Cycle Model ◽  
Cycle Model ◽  
The Great Depression ◽  
Standard Life ◽  
Program Benefit

A well‐established result in the literature is that Social Security reduces steady state welfare in a standard life cycle model. However, less is known about the historical quantitative effects of the program on agents who were alive when the program was adopted. In a computational life cycle model that simulates the Great Depression and the enactment of Social Security, this paper quantifies the welfare effects of the program's enactment on the cohorts of agents who experienced it. In contrast to the standard steady state results, we find that the adoption of the original Social Security generally improved these cohorts' welfare, in part because these cohorts received far more benefits relative to their contributions than they would have received if they lived their entire life in the steady state with Social Security. Moreover, the negative general equilibrium welfare effect of Social Security associated with capital crowd‐out was reduced during the transition, because it took many periods for agents to adjust their savings levels in response to the program's adoption. The positive welfare effect experienced by these transitional agents offers one explanation for why the program that may reduce welfare in the steady state was originally adopted.

scholarly journals Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy

2010 ◽  
Vol 48 (3) ◽  
pp. 693-751 ◽  
Author(s):  
Orazio P Attanasio ◽  
Guglielmo Weber
Keyword(s):  
Public Policy ◽  
Life Cycle ◽  
Point Of View ◽  
Theoretical Point ◽  
Critical Survey ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Intertemporal Allocation ◽  
Consumption And Saving ◽  
Standard Life

This paper provides a critical survey of the large literature on the life cycle model of consumption, both from an empirical and a theoretical point of view. It discusses several approaches that have been taken in the literature to bring the model to the data, their empirical successes, and their failures. Finally, the paper reviews a number of changes to the standard life cycle model that could help solve the remaining empirical puzzles.

scholarly journals The Presidents Social Security Plan: How much would you pay to participate?

2011 ◽  
Vol 4 (4) ◽  
Author(s):  
Frank Caliendo ◽  
Allen B. Atkins
Keyword(s):  
Life Cycle ◽  
Social Security ◽  
Life Cycle Model ◽  
Present Value ◽  
Cycle Model ◽  
Rates Of Return ◽  
Social Security Program ◽  
Retirement Accounts ◽  
Long Time ◽  
President Bush

President Bush is in favor of using private retirement accounts to partially replace the current pay-as-you-go social security program.  We use a simple life-cycle model to analyze whether or not private accounts would benefit workers.  "Cash equivalents" are calculated under different assumptions to see how much a worker would be willing to pay to participate in the private account program.  In most circumstances, workers would benefit from the private account program.  Only when market rates of return are very low or a person expects to live for a very long time does the current pay-as-you-go system give a greater present value to a worker.

Roth versus traditional accounts in a life-cycle model with tax risk

2012 ◽  
Vol 12 (1) ◽  
pp. 28-61 ◽  
Author(s):  
MARIE-EVE LACHANCE
Keyword(s):  
Life Cycle ◽  
Social Security ◽  
Risk Reduction ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Retirement Accounts ◽  
Small Risk ◽  
Traditional Account ◽  
Welfare Losses ◽  
Social Security Benefits

AbstractThis paper analytically solves a life-cycle model that compares traditional and Roth retirement accounts. It includes realistic features such as tax deductibility of contributions and taxation of withdrawals, tax bracket structure with deductions, taxation of Social Security benefits, and tax risk at retirement. With current taxes, choosing a traditional account over a Roth creates small welfare losses in only a few cases, largely for those with higher incomes and pensions who are subject to the taxation of Social Security benefits. We also investigate tax variability and find that diversified strategies offer only small risk reduction benefits in our illustrations.

scholarly journals It Sucks to Be Single! Marital Status and Redistribution of Social Security*

2020 ◽  
Author(s):  
Max Groneck ◽  
Johanna Wallenius
Keyword(s):  
Life Cycle ◽  
Life Expectancy ◽  
Social Security ◽  
Marital Status ◽  
Labour Supply ◽  
Life Cycle Model ◽  
Depressing Effect ◽  
Cycle Model ◽  
Marriage Stability ◽  
The Us

Abstract In this article, we study the labour supply effects and the redistributional consequences of the US social security system. We focus particularly on auxiliary benefits, where eligibility is linked to marital status. To this end, we develop a dynamic, structural life cycle model of singles and couples, featuring uncertain marital status and survival. We account for the socio-economic gradients to both marriage stability and life expectancy. We find that auxiliary benefits have a large depressing effect on married women’s employment. Moreover, we show that a revenue neutral minimum benefit scheme would moderately reduce inequality relative to the current US system.

Wealth and Consumption After Job Displacement

2021 ◽  
pp. 1-29
Author(s):  
Justin Barnette
Keyword(s):  
Life Cycle ◽  
Panel Study ◽  
Job Displacement ◽  
Income Dynamics ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Large Drop ◽  
Long Run ◽  
The Usa ◽  
Standard Life

Abstract Income drops permanently after an involuntary job displacement, but it has never been clear what happens to long run wealth in the USA. Upon displacement, wealth falls 14% relative to workers of the same age and similar education from the Panel Study of Income Dynamics (PSID). Their wealth is still 18% lower 12 years after the event. A standard life cycle model calibrated to US data with permanent decreases in income after displacement behaves differently than these findings. The agents in the model also experience a large drop in wealth but they recover. The biggest culprit for these differences is small and statistically insignificant changes to consumption in the PSID whereas agents in the model decrease their consumption considerably. Extending the model to include habit formation reconciles some of these differences by generating similar long run effects on wealth. This allows for the examination of wealth at death through the lens of the model.

scholarly journals OPTIMAL SAVINGS FOR RETIREMENT: THE ROLE OF INDIVIDUAL ACCOUNTS

2016 ◽  
Vol 21 (6) ◽  
pp. 1361-1388 ◽  
Author(s):  
Julia Le Blanc ◽  
Almuth Scholl
Keyword(s):  
Life Cycle ◽  
Low Income ◽  
Welfare Effects ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Income Risk ◽  
Income Groups ◽  
Quantitative Results ◽  
Individual Accounts

We employ a life-cycle model with income risk to analyze how tax-deferred individual accounts affect households' savings for retirement. We consider voluntary accounts as opposed to mandatory accounts with minimum contribution rates. We contrast add-on accounts with carve-out accounts that partly replace social security contributions. Quantitative results suggest that making add-on accounts mandatory has adverse welfare effects across income groups. Carve-out accounts generate positive welfare effects across all income groups, but gains are lower for low income earners. Default investment rules in individual accounts have a modest impact on welfare.

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