Does Social Security Crowd out Private Wealth? A Survey of the Literature

38 Pages Posted: 5 May 2021 Last revised: 9 Dec 2021

See all articles by Marcin Wroński

Marcin Wroński

Warsaw School of Economics (SGH) - Collegium of World Economy

Date Written: May 4, 2021

Abstract

Economic theory does not give clear predictions on the impact of social security on private wealth. The theoretical ambiguity and practical importance generated a large stream of empirical research. In this paper, we review the available evidence on displacement effects of social security. Our review includes over 100 theoretical and empirical contributions.

Nearly 70% of the literature identifies the statistically significant impact of social security wealth on different forms of private savings. A strong majority of authors, who obtain statistically significant results find the negative impact of social security on private savings. The size of the impact varies. If we consider all contributions median study identifies a statistically significant, but small negative impact of social security on private wealth.

Although the literature is large it has some common limitations. Probably the most important is the use of uniform and static life tables, which biases the true value of social security wealth. The literature is largely focused on developed economies, availability of research on middle-income and developing countries is low.

Keywords: social security, private wealth, crowd-out effect, substitution, household wealth, public pension system

JEL Classification: D14, D15, H55

Suggested Citation

Wroński, Marcin, Does Social Security Crowd out Private Wealth? A Survey of the Literature (May 4, 2021). Available at SSRN: https://ssrn.com/abstract=3839366 or http://dx.doi.org/10.2139/ssrn.3839366

Marcin Wroński (Contact Author)

Warsaw School of Economics (SGH) - Collegium of World Economy ( email )

Al. Niepodległości 164
Warszawa, 02-554
Poland

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