Quantifying the Inefficiency of the US Social Insurance System
How far is the US social insurance system from an efficient system? We answer this question within a model where agents receive idiosyncratic, labor-productivity shocks that are privately observed. When social security and income taxation comprise the social insurance system, the maximum possible efficiency gain is equivalent to a 10:5 percent increase in consumption. This occurs when labor productivity diferences are set to the permanent diferences estimated in US data.
Year of publication: |
2005-05-16
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Institutions: | Georgetown University, Department of Economics |
Subject: | Social Security | Idiosyncratic Shocks | Efficient Allocations | Private Information |
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