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The Cost of Uncertainty about the Timing of Social Security Reform

Frank Caliendo (), Aspen Gorry and Sita Slavov

No 21585, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a model to study optimal decision making in the face of uncertainty about the timing and structure of a future event. The model is used to study optimal decision making and welfare when individuals face uncertainty about when and how Social Security will be reformed. When individuals save optimally for retirement, the welfare cost of uncertainty about the timing and structure of reform is just a few basis points of total lifetime consumption. In contrast, the cost of reform uncertainty can be greater than 1% of total lifetime consumption for individuals who do not save.

JEL-codes: C61 E21 E60 H30 H55 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-age and nep-mac
Note: AG PE
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Published as Frank N. Caliendo & Aspen Gorry & Sita Slavov, 2019. "The Cost of Uncertainty about the Timing of Social Security Reform," European Economic Review, .

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