Does Social Security Privatization Produce Efficiency Gains?
Shinichi Nishiyama () and
Kent Smetters
The Quarterly Journal of Economics, 2007, vol. 122, issue 4, 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.
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (225)
Downloads: (external link)
http://hdl.handle.net/10.1162/qjec.2007.122.4.1677 (application/pdf)
Access to full text is restricted to subscribers.
Related works:
Working Paper: Does Social Security Privatization Produce Efficiency Gains? (2005) 
Working Paper: Does Social Security Privatization Produce Efficiency Gains? (2005) 
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:oup:qjecon:v:122:y:2007:i:4:p:1677-1719.
Ordering information: This journal article can be ordered from
https://academic.oup.com/journals
Access Statistics for this article
The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva
More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().