EconPapers    
Economics at your fingertips  
 

Does Social Security Privatization Produce Efficiency Gains?

Shinichi Nishiyama () and Kent Smetters ()

The Quarterly Journal of Economics, 2007, vol. 122, issue 4, pages 1677-1719

Abstract: While privatizing social security can improve labor supply incentives, it can also reduce risk sharing. We analyze a 50% privatization using an overlapping-generations model where heterogeneous agents with elastic labor supply face idiosyncratic earnings shocks and longevity uncertainty. When wage shocks are insurable, privatization produces about $18,100 of extra resources for each future household after all transitional losses have been compensated for with lump-sum taxes. When wages are not insurable, privatization reduces efficiency by about $2,400 per future household. We check the robustness of these results to different model specifications as well as policy reforms and arrive at several surprising conclusions. First, privatization performs better in a closed economy, where interest rates decline with capital accumulation, than in an open economy. Second, privatization also performs better when an actuarially fair private annuity market does not exist. Third, government matching of private contributions on a progressive basis is not very effective at restoring efficiency and can actually cause harm. (c) 2007 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

Date: 2007
References: Add references at CitEc
Citations View citations in EconPapers (67) Track citations by RSS feed

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdfplus/10.1162/qjec.2007.122.4.1677 link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Does Social Security Privatization Produce Efficiency Gains? (2005) Downloads
Working Paper: Does Social Security Privatization Produce Efficiency Gains? (2005) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:tpr:qjecon:v:122:y:2007:i:4:p:1677-1719

Ordering information: This journal article can be ordered from
http://mitpress.mit. ... me.tcl?issn=00335533

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Edward L. Glaeser and Lawrence F. Katz

More articles in The Quarterly Journal of Economics from MIT Press
Series data maintained by Karie Kirkpatrick ().

 
Page updated 2014-07-18
Handle: RePEc:tpr:qjecon:v:122:y:2007:i:4:p:1677-1719