The Cost of Uncertainty About the Timing of Social Security Reform

52 Pages Posted: 28 Sep 2015

See all articles by Frank Caliendo

Frank Caliendo

Utah State University

Aspen Gorry

John E. Walker Department of Economics

Sita Slavov

George Mason University - School of Policy, Government, and International Affairs

Date Written: September 2015

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.

Suggested Citation

Caliendo, Frank and Gorry, Aspen and Slavov, Sita, The Cost of Uncertainty About the Timing of Social Security Reform (September 2015). NBER Working Paper No. w21585, Available at SSRN: https://ssrn.com/abstract=2666353

Frank Caliendo (Contact Author)

Utah State University ( email )

Logan, UT 84322
United States

Aspen Gorry

John E. Walker Department of Economics ( email )

228 Sirrine Hall
Clemson, SC 29634
United States

Sita Slavov

George Mason University - School of Policy, Government, and International Affairs ( email )

Founders Hall
3351 Fairfax Dr.
Arlington, VA 22201
United States

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