SOCIAL SECURITY AND PRIVATE SAVING: A TIME SERIES ANALYSIS.

摘要

Social Security benefits have been rapidly growing to become the second largest item on the federal budget. Because the program is financed on a pay-as-you-go basis, with current taxes funding current benefits, Social Security was claimed to have a negative effect on private saving. The expectation of Social Security future benefits may induce consumption and reduce saving if wealth gains are realized. Even in the absence of any wealth gains, Social Security may reduce private saving as individuals substitute the program public pensions for their private saving for retirement. On the other hand, Social Security taxes have a negative effect on incentives to work, and therefore may increase saving of those who retire sooner than they would have in the absence of the program. Another offsetting positive effect is the possible increase in saving for bequests by parents who may desire to compensate their children for the burden of the social security taxes levied on the working generation. Numerous empirical time-series studies have been conducted to estimate the impact of Social Security on private saving. In a series of papers Martin Feldstein concluded that Social Security has caused a 30-50 percent reduction in private saving. Several other authors, using different variable definitions and sample periods, reached mixed conclusions. Some studies support Feldstein's, others have found a positive relationship, a third group has found that Social Security has no effect on private saving, and the issue has remained unsolved. For this reason this dissertation has reestimated the impact of Social Security on private saving using aggregate time-series data. The study has improved the definition and adjusted the measurement of some variables, and used a more appropriate estimation method. The general conclusion of this dissertation is that there is no statistical evidence of the original findings of Feldstein that Social Security has negative effect on private saving.