The Welfare Cost of Perceived Policy Uncertainty: Evidence from Social Security

Erzo Luttmer and Andrew Samwick

American Economic Review, 2018, vol. 108, issue 2, 275-307

Abstract: Policy uncertainty reduces individual welfare when individuals have limited opportunities to mitigate or insure against the resulting consumption fluctuations. We field an original survey to measure the degree of perceived policy uncertainty in Social Security benefits and to estimate the impact of this uncertainty on individual welfare. Our central estimates show that on average individuals are willing to forgo 6 percent of the benefits they are supposed to get under current law to remove the policy uncertainty associated with their future Social Security benefits. This translates to a risk premium from policy uncertainty equal to 10 percent of expected benefits.

JEL-codes: D14 D81 H55 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20151703
References: Add references at CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/aer.20151703 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... NXGGtpa4IfMFkLHoKa55 (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... amd9u0U0RFmF7I749fr3 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... vfOIXct7DWEuSsz6J3yq (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: The Welfare Cost of Perceived Policy Uncertainty: Evidence from Social Security (2015)
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: https://EconPapers.repec.org/RePEc:aea:aecrev:v:108:y:2018:i:2:p:275-307

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().