Social Security and Unsecured Debt
Erik Hurst () and
No 10282, NBER Working Papers from National Bureau of Economic Research, Inc
Most young households simultaneously hold both unsecured debt on which they pay an average of 10 percent interest and social security wealth on which they earn less than 2 percent. We document this fact using data from the Panel Study of Income Dynamics. We then consider a life-cycle model with optimizing and rule-of-thumb' households and explore ways to reduce this inefficiency. We show that both allowing households to use social security wealth to pay off debt and exempting young households from social security contributions (but in both cases requiring higher contributions later later in life) leads to increases in welfare for both types of households and significant increases in consumption and saving, and reductions in debt, for optimizing households.
JEL-codes: E2 E6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pub
Note: AP PE
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed
Published as Hurst, Erik & Willen, Paul, 2007. "Social security and unsecured debt," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1273-1297, August.
Downloads: (external link)
Journal Article: Social security and unsecured debt (2007)
Working Paper: Social Security and unsecured debt (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:10282
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().