Is Social Security Behind the Collapse of Personal Saving?

23 Pages Posted: 12 Aug 2009

Date Written: August 2009

Abstract

This paper considers the quantitative role of growth in the size of the social security program in contributing to the collapse of personal saving in the U.S. over the last few decades. Using a calibrated, general equilibrium life-cycle model this paper shows that social security may not be to blame. Specifically, the model predicts that a 50-percent increase in the social security tax rate (as in the U.S. over the last half century) produces a modest decline in the personal saving rate from 10 percent down to 9.6 percent. This result runs counter to some popular opinion.

Keywords: NIPA personal saving rate, social security, life-cycle permanent-income model, general equilibrium calibration

JEL Classification: E21, D91, H55

Suggested Citation

Caliendo, Frank, Is Social Security Behind the Collapse of Personal Saving? (August 2009). CESifo Working Paper Series No. 2746, Available at SSRN: https://ssrn.com/abstract=1447249 or http://dx.doi.org/10.2139/ssrn.1447249

Frank Caliendo (Contact Author)

Utah State University ( email )

Logan, UT 84322
United States

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