Quantifying the Inefficiency of the US Social Insurance System

Mark Huggett (Georgetown University) and Juan Carlos Parra (Georgetown University) ()
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Mark Huggett (Georgetown University) and Juan Carlos Parra (Georgetown University): Department of Economics, Georgetown University, http://www9.georgetown.edu/faculty/mh5/
Authors registered in the RePEc Author Service: Mark Huggett and Juan Carlos Parra ()

Working Papers from Georgetown University, Department of Economics

Abstract: How far is the US social insurance system from an efficient system? We answer this question within a model where agents receive idiosyncratic, labor-productivity shocks that are privately observed. When social security and income taxation comprise the social insurance system, the maximum possible efficiency gain is equivalent to a 10:5 percent increase in consumption. This occurs when labor productivity diferences are set to the permanent diferences estimated in US data.

Keywords: Social Security; Idiosyncratic Shocks; Efficient Allocations; Private Information (search for similar items in EconPapers)
JEL-codes: D80 D90 E21 (search for similar items in EconPapers)
Date: 2005-05-16
New Economics Papers: this item is included in nep-dge, nep-ias, nep-mac, nep-pbe and nep-pub
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Working Paper: quantifying the inefficiency of the US social insurance system (2006)
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