The US Social Security System: What Does Political Sustainability Imply?

Vincenzo Galasso

Review of Economic Dynamics, 1999, vol. 2, issue 3, 698-730

Abstract: This paper examines how political constraints can shape the social security system under different demographics. A steady state mapping between relevant economic and demographic variables and the social security tax rate resulting from a majority voting is provided. I calibrate an OLG model to the US economy. Calculations using Census population and survival probabilities projections, and 1961-96 labor productivity growth deliver a social security tax rate of 13.3% (currently 11.2%), and a 54% replacement ratio (51.7%). This result reflects the median voter's aging, from 44 to 46 years, which dominates the decrease in the dependency ratio, from 5.45 to 4.72. (Copyright: Elsevier)

Keywords: unfunded social security system; political equilibria; labor productivity (search for similar items in EconPapers)
JEL-codes: D72 E17 H55 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (33)

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DOI: 10.1006/redy.1998.0049

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