'Precautionary' Saving Revisited: Social Security, Individual Welfare, and the Capital Stock / R. Glenn Hubbard.

Format:

Book

Author/Creator:

Hubbard, R. Glenn.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1430.

NBER working paper series no. w1430

Language:

English

Subjects (All):

Saving and investment--United States.

Saving and investment.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Precautionary' Saving Revisited

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1984.

Cambridge : National Bureau of Economic Research, 1984.

Summary:

This paper focuses on precautionary saving against uncertain longevity and on the annuity insurance aspects of social security within the life-cycle framework. The principal findings are three. First, the evolution of social security is reviewed in response to missing markets for providing insurance for consumption in the face of lifetime uncertainty. A simple life-cycle model is used to show that even an actuarially fair, fully funded social security system can reducenational saving. Second, to the extent that the introduction of social security reduces the size of accidental bequests, the net effect on the consumption of subsequent generations is diminished. Finally,consideration of the welfare gains from compulsory social security requires an examination of the tradeoff between the benefits to early participants from access to the annuities and the costs to generations that follow of a lower capital stock. Across a range of parameter values, the partial equilibrium impact of social security on consumptionis reversed. The introduction of an explicit bequest motive ivitigates both the initial impact of social security on saving and the long-run welfare loss from the introduction of social security.

Notes:

Print version record

August 1984.