Projected U.S. demographics and social security

Mariacristina De Nardi (), Selahattin Imrohoglu and Thomas Sargent ()
Authors registered in the RePEc Author Service: Selahattin Imrohoroglu ()

No WP-98-14, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Without policy reforms, the aging of the U.S. population is likely to increase the burden of the currently unfunded social security and medicare systems. In this paper we build an applied general equilibrium model and incorporate the population projections made by the Social Security Administration (SSA) to evaluate the macroeconomic and welfare implications of alternative fiscal responses to the retirement of the baby- boomers. Our calculation suggest that it will be costly to maintain the benefits at the levels now promised because the increases in distortionary taxes required to finance those benefits will reduce private saving and labor supply. We also find that the “accounting calculations” made by SSA underestimate the required fiscal adjustments. Finally, our results confirm that policies with similar long-run characteristics have very different transitional implications about the distribution of welfare across generations.

Keywords: Demography; Social security (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 1998
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Journal Article: Projected U.S. Demographics and Social Security (1999)
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