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http://hdl.handle.net/10419/60943
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| Title: | | Sustainable social security: Four options  |
| Authors: | | Kitao, Sagiri |
| Issue Date: | | 2011 |
| Series/Report no.: | | Staff Report, Federal Reserve Bank of New York 505 |
| Abstract: | | This paper presents four policy options to make Social Security sustainable under the coming demographic shift: 1) increase payroll taxes by 6 percentage points, 2) reduce the replacement rates of the benefit formula by one-third, 3) raise the normal retirement age from sixty-six to seventy-three, or 4) means-test the benefits and reduce them one-to-one with income. While all four policies achieve the same goal, their economic outcomes differ significantly. Options 2 and 3 encourage own savings, and capital stock is more than 10 percent higher than in the other two options. The payroll tax increase in option 1 discourages work effort, but means-testing the benefits as outlined in option 4 yields the worst labor disincentives, especially among the elderly. |
| Subjects: | | Social Security reform and sustainability general equilibrium labor force participation retirement age demographic shift overlapping generations |
| JEL: | | E2 E6 H55 J2 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Staff Reports, Federal Reserve Bank of New York
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