The Effect of Social Security on Private Savings: The Time Series Evidence

15 Pages Posted: 26 Oct 2000 Last revised: 16 Mar 2002

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: February 1979

Abstract

This paper reviews the studies by Robert Barro, Michael Darby, and Alicia Munnell, as well as my own earlier time-series study and presents new estimates using the revised national income-account data. The basic estimates of each of the four studies point to an economically substantial effect that is very unlikely to have been observed by chance alone. Although including variables like the Government surplus (Barro) or a measure of real money balance (Darby) can lower the estimated coefficient of the social security wealth variable, this paper explains their inappropriateness in the aggregate consumption function. Use of new data on national income and its components from the Department of Commerce improves my earlier estimates and shows that the unemployment variable does not belong in the consumption function once the level of income and its rate of change are included.

Suggested Citation

Feldstein, Martin S., The Effect of Social Security on Private Savings: The Time Series Evidence (February 1979). NBER Working Paper No. w0314, Available at SSRN: https://ssrn.com/abstract=247708

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