Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Structural Reform of Social Security
Journal of Economic Perspectives
vol. 19,
no. 2, Spring 2005
(pp. 33–55)
(Complimentary)
Abstract
Governments around the world have enacted or are currently considering fundamental structural reforms of their Social Security pension programs. The key feature in these reforms is a shift from a pure pay-as-you-go tax-financed system, in which taxes on current workers are primarily distributed to current retirees, to a mixed system that combines pay-as-you-go benefits with investment-based personal retirement accounts. This paper discusses how such a mixed system could work in practice and how the transition to such a change could be achieved. It then analyzes the economic gains that would result from shifting to a mixed system. I turn next to the three problems that critics raise about any investment-based plan: administrative costs, risk, and income distribution. Finally, I comment on some of the ad hoc proposals for dealing with the financial problem of Social Security without shifting to an investment-based system.Citation
Feldstein, Martin. 2005. "Structural Reform of Social Security." Journal of Economic Perspectives, 19 (2): 33–55. DOI: 10.1257/0895330054048731JEL Classification
- H55 Social Security and Public Pensions
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
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