International Differences in Social Security and Saving

Abstract

The U.S. Social Security Administration, in cooperation with similar agencies in other countries, recently developed estimates of social security benefits for twelve major industrial countries. The present paper uses these data to estimate the effects of social security benefits on saving and retirement in an extended life cycle model. The parameter estimates indicate that, with retirement behavior given, social security significantly reduces private saving: an increase of the benefit-to-earnings ratio by 10 percentage points reduces the saving rate by approximately 3 percentage points.