[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/taf/rrpaxx/v17y2012i2p39-62.html
   My bibliography  Save this article

Privatizing the Social Security Program in the U.S.: How to Overcome the Transition Costs

Author

Listed:
  • Youngse Mun
  • Inho Mun
Abstract
This study posits that privatization is an ideal solution to the projected budget imbalance of Social Security and focuses mainly on finding ways to make a smooth transition. Five methods of financing the transition are investigated using a policy model—payroll increase, government subsidy, benefit cuts, Trust Fund conversion into Pension Fund, faster exhaustion of the Trust Fund—all having the same end result of a 3.12% payroll tax under the privatized, fully funded scheme, replacing the 13%–17% payroll tax under the current system. Yet, the magnitude of the burden of transition costs differs depending on which of the five is used. Using the equity concern inspired by John Rawls’ principle of justice, this paper combines the five aforementioned methods to minimize the burden on the transitional generation. From simulation results under the assumptions of specific parametric values projected by the Social Security Administration, this paper concludes that people who lose from the transition can be limited to those of age 44 to 65, with minimal welfare loss.

Suggested Citation

  • Youngse Mun & Inho Mun, 2012. "Privatizing the Social Security Program in the U.S.: How to Overcome the Transition Costs," International Review of Public Administration, Taylor & Francis Journals, vol. 17(2), pages 39-62, August.
    • Handle: RePEc:taf:rrpaxx:v:17:y:2012:i:2:p:39-62
    DOI: 10.1080/12294659.2012.10805227
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/12294659.2012.10805227
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/12294659.2012.10805227?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Olivia S. Mitchell, 1998. "Administrative Costs in Public and Private Retirement Systems," NBER Chapters, in: Privatizing Social Security, pages 403-456, National Bureau of Economic Research, Inc.
    2. Peter A. Diamond, 2000. "Administrative Costs and Equilibrium Charges with Individual Accounts," NBER Chapters, in: Administrative Aspects of Investment-Based Social Security Reform, pages 137-172, National Bureau of Economic Research, Inc.
    3. Diamond, Peter A., 2002. "Social Security Reform," OUP Catalogue, Oxford University Press, number 9780199247899.
    4. Peter A. Diamond (ed.), 1999. "Issues in Privatizing Social Security: Report of an Expert Panel of the National Academy of Social Insurance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262041774, April.
    5. Peter A. Diamond & Peter R. Orszag, 2005. "Saving Social Security," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 11-32, Spring.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    2. Chavez-Bedoya, Luis & Castaneda, Ranu, 2021. "A benchmarking approach to track and compare administrative charges on flow and balance in individual account pension systems," Insurance: Mathematics and Economics, Elsevier, vol. 97(C), pages 7-23.
    3. Luis Chávez-Bedoya & Nelson Ramírez-Rondán, 2014. "Comparando Comisiones por Flujo y Saldo en Fondos de Pensiones con Cuentas Individuales de Capitalización," Working Papers 9, Peruvian Economic Association.
    4. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    5. Greco, Luciano G., 2006. "The optimal design of funded pensions," LSE Research Online Documents on Economics 24519, London School of Economics and Political Science, LSE Library.
    6. Martin Feldstein, 2009. "Reducing the Risk of Investment-Based Social Security Reform," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 201-218, National Bureau of Economic Research, Inc.
    7. Michael Kaganovich & Itzhak Zilcha, 2008. "Alternative Social Security Systems and Growth," CESifo Working Paper Series 2353, CESifo.
    8. Luciano Greco, 2005. "The Optimal Design of Funded Pension Plans: Unbundling Financing and Investment," "Marco Fanno" Working Papers 0003, Dipartimento di Scienze Economiche "Marco Fanno".
    9. Gabay, Daniel & Grasselli, Martino, 2012. "Fair demographic risk sharing in defined contribution pension systems," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 657-669.
    10. Nicholas Barr & Peter Diamond, 2006. "The Economics of Pensions," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(1), pages 15-39, Spring.
    11. Kaganovich, Michael & Zilcha, Itzhak, 2012. "Pay-as-you-go or funded social security? A general equilibrium comparison," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 455-467.
    12. R. Melis & A. Trudda, 2014. "Mixed pension systems sustainability," Working Paper CRENoS 201413, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    13. Blerina Mucaj, 2006. "Efficiency of Pension Funds Management in OECD Countries: Registered Retirement Savings Plan in Canada," Development Discussion Papers 2006-05, JDI Executive Programs.
    14. Libor Dusek, 2007. "Political Risk of Social Security: The Case of the Indexation of Benefits in the Czech Republic," CERGE-EI Working Papers wp318, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    15. Impavido, Gregorio & Rocha, Roberto, 2006. "Competition and performance in the Hungarian second pillar," Policy Research Working Paper Series 3876, The World Bank.
    16. Lindbeck, Assar & Persson, Mats, 2000. "What Are the Gains from Pension Reform?," Working Paper Series 535, Research Institute of Industrial Economics.
    17. Dummann, Kathrin, 2008. "Retirement saving and attitude towards financial intermediaries: Evidence for Germany," Thuenen-Series of Applied Economic Theory 99, University of Rostock, Institute of Economics.
    18. Peeters, Marga, 2011. "“Better Safe than Sorry” - Individual Risk-free Pension Schemes in the European Union - Macroeconomic Benefits, the Mobile Working Citizen’s Perspective and Why Nots," MPRA Paper 33571, University Library of Munich, Germany.
    19. Douglas W. Elmendorf & Jeffrey B. Liebman & David W. Wilcox, 2001. "Fiscal Policy and Social Security Policy During the 1990s," NBER Working Papers 8488, National Bureau of Economic Research, Inc.
    20. Jacob Bikker & Jan de Dreu, 2006. "Pension fund efficiency: the impact of scale, governance and plan design," DNB Working Papers 109, Netherlands Central Bank, Research Department.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rrpaxx:v:17:y:2012:i:2:p:39-62. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RRPA20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.