امنیت اجتماعی و بدهی های نا امن
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|24179||2007||25 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Public Economics, Volume 91, Issues 7–8, August 2007, Pages 1273–1297
In this paper, we use a calibrated life-cycle model to explore quantitatively ways of reducing the burden of social security in a world populated by both optimizing and rule-of-thumb consumers. Social security contributions force young households with upward-sloping income profiles to save a sizeable portion of their income for retirement, when their optimal consumption plan would likely have them either saving little or borrowing. We first use household data to document that young households have accumulated social security contributions that are large relative to debt holdings. Then, using a calibrated life-cycle model, we show that both allowing households to use social security wealth to pay off their debt and exempting young households from social security contributions (but in both cases requiring higher contributions later) mitigate many of the inefficiencies of social security from the perspective of life-cycle financial planning. Specifically, in our preferred experiment, which exempts households whose heads are under 30 from making social security contributions, we find that certainty-equivalent consumption increases by 3.4% for optimizing households and by 3.3% for rule-of-thumb households.
Many households, particularly the young, hold large amounts of unsecured debt on which they pay a high interest rate.2 At the same time, many of these households have made substantial contributions into the social security system on which they earn a low return, thus imposing a potentially suboptimal financial planning regime. In this paper, we use a calibrated life-cycle model to explore quantitatively ways of reducing the burden of social security on such households. We show that both allowing households to use social security wealth to pay off their debt and exempting young households from making social security contributions (but in both cases requiring higher contributions later so as not to affect the present value of total lifetime contributions) can mitigate many of the inefficiencies of social security from the perspective of life-cycle financial planning. We begin the paper by comparing empirically the distribution across individuals of non-collateralized debt and accumulated social security contributions. In our sample of households under the age of 40, 62% have unsecured debt. We show that if households could access their accumulated social security contributions to pay off debt, only 17% would continue to hold debt. And for that 17%, total debt would be dramatically reduced: for the 90th-percentile household in the debt distribution, unsecured debt would fall from 84% to 33% of that household's average income. We conclude that there is a large potential margin to reduce household debt that could be achieved if young households were allowed access to their past social security contributions. In Section 3, we construct a dynamic life-cycle portfolio choice model with an embedded social security program. We follow Campbell and Mankiw (1989) and others in assuming that the world is populated by two types of households: optimizing households that use financial assets to maximize utility and “rule-of-thumb” households that simply set consumption equal to income. Among other things, rule-of-thumb households provide a justification for the existence of social security. Specifically, social security prevents destitution for rule-of-thumb households once they enter retirement and have no income and no savings. For the optimizing households, we adapt the model developed by Davis et al. (2006). In that model, households can invest in stocks and bonds and can also take out unsecured loans. We specify that the interest rate on unsecured debt (that is, the borrowing rate) exceeds the interest rate on bonds (that is, the lending rate). Such an assumption is consistent with the empirical pattern of observed borrowing and lending rates.3 The parameterization of this model roughly matches the life-cycle borrowing behavior documented in Section 2. In Section 4, we analyze the effects of two policy experiments aimed at alleviating the inefficiency to young households that has them simultaneously making large social security contributions and holding unsecured debt on which they pay a high interest rate. In our first experiment, we allow households currently in the social security system to access their accumulated social security contributions to pay off debt. In our second experiment, we build on an idea of Hubbard and Judd (1987) and exempt young households from social security contributions. Under both proposals, households would contribute more to social security (via higher taxes) later in their working lives to compensate for their reduced contributions while young. Such an assumption ensures unchanged social security benefits upon retirement. Both of the above proposals lead to increases in saving, reductions in debt, and increases in certainty-equivalent consumption.4 For example, under our preferred policy, we move households from our existing system to one in which households under 30 are exempt from contributing to social security. We find that such a policy raises certainty-equivalent consumption by 3.4% for optimizing households and 3.3% for rule-of-thumb households. Our analysis also yields valuable insights for the current debate on reforming social security. One often-discussed inefficiency of the social security system is that it forces everyone to invest all of their social security contributions in low-yielding assets. We show that our proposed social security exemptions raise welfare by as much as, or, in some cases, more than the result that would be achieved if the social security system could achieve a 5% real riskless return on its investments. Thus, exemptions allow us to address one additional criticism of the current social security system without the costly and politically problematic option of allowing individuals to invest social security funds in risky assets. Finally, we draw attention to one other possibility offered by our experiments. By either giving an exemption or allowing a withdrawal but requiring higher contributions later, the government is effectively lending money to households. We call the interest rate on such loans the internal borrowing rate (IBR). The conditions we impose imply that the IBR equals the internal rate of return on social security investment. But the welfare gains from these “loans” are so big that the government could charge a higher IBR and still make households better off. We show that a combination of the age-40 exemption and an increase in the IBR from 2% to 5% still leads to a significant increase in welfare for both optimizing and rule-of-thumb households. We also show that raising the IBR would significantly improve the finances of the social security system. In other words, we show that the government could borrow at 2%, lend at 5%, and still make households better off. Therefore, one version of our proposal could improve the solvency of the social security system while at the same time making households better off. This paper adds to the literature that examines the effects of a social security program on household behavior. For a survey, see Feldstein and Liebman (2002). We draw the reader's attention to three particularly relevant papers. Feldstein and Ranguelova (2001) calculate the effects on retirement income of their proposal to replace the current pay-as-you-go social security system with individual accounts in which households can invest in equity. They find that people typically do better with individual accounts, although there is a small probability that they will do worse. Our approach to reforming social security owes a significant debt to Hubbard and Judd's (1987) analysis of social security, in which households face borrowing constraints.5 They show, as we do, that an exemption from social security contributions early in the life cycle yields substantial welfare benefits. Our analysis differs from theirs in two key respects. First, we analyze the effects of exemptions on households that do not plan for the future, our “rule-of-thumb” households. And second, households in our model can invest in stocks and borrow, activities not offered to households in Hubbard and Judd's model. Campbell et al. (2001) explore the effects on portfolio choice and utility of allowing households to invest some of their social security wealth in equities, in the context of a life-cycle model with no borrowing. They find that a combination of smaller contributions and investment in equities leads to substantial welfare increases.
نتیجه گیری انگلیسی
In this paper, we show that the current social security system leads many households to save at low interest rates and borrow at high interest rates. We show empirically that simply allowing households to use the money they have paid in to the social security system to pay off debt would allow many households to get out of debt completely and others to dramatically reduce their exposure to high interest unsecured debt. We then considered two policy experiments aimed at resolving this problem in the context of a life-cycle model with both optimizing and rule-of-thumb households. First, we considered options to change the age structure of social security contributions to prevent households from borrowing while they also contribute to social security. Particularly, we proposed exempting younger households from contributions altogether. Additionally, we considered allowing households to use the money in social security to get out of debt. With both of these programs, we required larger contributions later in life so as to leave the net present value of total contributions the same as under the current system. We found that both proposals, but, in particular, the former, solved the problem in question and led to significant increases in household welfare, consumption, and saving and to reductions in high interest unsecured debt. Moreover, our exemption proposals led to increases in welfare for both optimizing and rule-of-thumb households. Additionally, we showed that our options generated comparable and often higher welfare increases than popular proposals to increase the return on investment in social security. And they did so without any major administrative change to the social security system. There are no individual accounts. There is no uncertainty about returns. And it preserves the basic functions of social security in that it does not subject rule-of-thumb households to politically unacceptable risks during retirement. With larger changes to social security, for example, the age-40 and -50 exemption, the assumptions that labor supply remains unchanged and that asset prices remain unchanged become increasingly untenable. But, as noted above, for one policy proposal — the age-30 exemption — neither extension should have a sizeable effect on our conclusions. First, the increase in withholding on labor income is very small — rising from 10.6 to 12.9% of income, comparable in magnitude to the increase in social security withholding that took place between 1980 and 1994. Second, Table 4 shows that an age-30 exemption has a small impact on consumption demand (a little more than a 1-percent increase) and a small impact on saving (a little more than a 4-percent increase). The main change is a dramatic reduction in consumer unsecured debt. Such a change could affect the wedge between borrowing and lending rates. Analyzing the general equilibrium effects of such a policy change on consumer credit markets would be a fruitful area for future research.