Is Altruism Important for Understanding the Long-Run Effects of Social Security?

Luisa Fuster

Review of Economic Dynamics, 1999, vol. 2, issue 3, 616-637

Abstract: This paper quantifies the effects of social security on capital accumulation and wealth distribution in a life-cycle framework with altruistic individuals. The main findings of this paper are that the current U.S. social security system has a significant impact on capital accumulation and wealth distribution. I find that social security crowds out 8% of the capital stock of an economy without social security. This effect is driven by the distortions of labor supply due to the taxation of labor income rather than by the intergenerational redistribution of income imposed by the social security system. In contrast to previous analysis of social security, I found that social security does not affect the savings rate of the economy. Another interesting finding is that even though the current U.S. social security system is progressive in its benefits, it may lead to a more dispersed distribution of wealth. (Copyright: Elsevier)

Keywords: social security; altruism; capital accumulation; labor market distortions; wealth distribution (search for similar items in EconPapers)
JEL-codes: D31 D58 E2 E6 H55 J22 J26 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (56)

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DOI: 10.1006/redy.1999.0063

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