[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/15070.html
   My bibliography  Save this paper

Is Social Security Part of the Social Safety Net?

Author

Listed:
  • Jeffrey R. Brown
  • Julia Lynn Coronado
  • Don Fullerton
Abstract
Building on the existing literature that examines the extent of redistribution in the Social Security system as a whole, this paper focuses more specifically on how Social Security affects the poor. This question is important because a Social Security program that reduces overall inequality by redistributing from high income individuals to middle income individuals may do nothing to help the poor; conversely, a program that redistributes to the poor may nonetheless be regressive according to broader measures if it also redistributes from middle to upper income households. We have four major findings. First, as we expand the definition of income to use more comprehensive measures of well-being, we find that Social Security becomes less progressive. Indeed, when we use an "endowment" defined by potential labor earnings at the household level, rather than actual earnings at the individual level, we find that Social Security has virtually no effect on overall inequality. Second, we find that this result is driven largely by the lack of redistribution across the middle and upper part of the income distribution, so it masks some small positive net transfers to those at the bottom of the lifetime income distribution. Third, in cases where redistribution does occur, we find it is not efficiently targeted: many high income households receive positive net transfers, while many low income households pay net taxes. Finally, the redistributive effects of Social Security change over time, and these changes depend on the income concept used to classify someone as "poor".

Suggested Citation

  • Jeffrey R. Brown & Julia Lynn Coronado & Don Fullerton, 2009. "Is Social Security Part of the Social Safety Net?," NBER Working Papers 15070, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:15070
    Note: AG PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w15070.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:bla:revinw:v:27:y:1981:i:4:p:401-21 is not listed on IDEAS
    2. Martin S. Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Effects of an Investment-Based Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 263-326, National Bureau of Economic Research, Inc.
    3. Lerman, Robert I. & Yitzhaki, Shlomo, 1995. "Changing Ranks and the Inequality Impacts of Taxes and Transfers," National Tax Journal, National Tax Association, vol. 48(1), pages 45-59, March.
    4. Gustman, Alan L. & Steinmeier, Thomas L., 2001. "How effective is redistribution under the social security benefit formula?," Journal of Public Economics, Elsevier, vol. 82(1), pages 1-28, October.
    5. Jeffrey B. Liebman, 2002. "Redistribution in the Current U.S. Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 11-48, National Bureau of Economic Research, Inc.
    6. James E. Duggan & Robert Gillingham & John S. Greenlees, 1993. "Returns Paid To Early Social Security Cohorts," Contemporary Economic Policy, Western Economic Association International, vol. 11(4), pages 1-13, October.
    7. Alan L. Gustman & Thomas L. Steinmeier, 2000. "Social Security Benefits of Immigrants and U.S. Born," NBER Chapters, in: Issues in the Economics of Immigration, pages 309-350, National Bureau of Economic Research, Inc.
    8. Kopczuk, Wojciech & Saez, Emmanuel, 2004. "Top Wealth Shares in the United States, 1916-2000: Evidence From Estate Tax Returns," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 445-487, June.
    9. Jeffrey Brown & Jeffrey B. Liebman & Joshua Pollet, 2002. "Appendix. Estimating Life Tables That Reflect Socioeconomic Differences In Mortality," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 447-458, National Bureau of Economic Research, Inc.
    10. Steven Caldwell & Melissa Favreault & Alla Gantman & Jagadeesh Gokhale & Thomas Johnson & Laurence J. Kotlikoff, 1999. "Social Security's Treatment of Postwar Americans," NBER Chapters, in: Tax Policy and the Economy, Volume 13, pages 109-148, National Bureau of Economic Research, Inc.
    11. Boskin, Michael J. & Kotlikoff, Lawrence J. & Puffert, Douglas J. & Shoven, John B., 1986. "Social Security: A Financial Appraisal Across and Within Generations," CEPR Publications 244432, Stanford University, Center for Economic Policy Research.
    12. Jeffrey Brown, 2002. "Differential Mortality and the Value of Individual Account Retirement Annuities," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 401-446, National Bureau of Economic Research, Inc.
    13. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August.
    14. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1.
    15. Feldstein, Martin & Liebman, Jeffrey B. (ed.), 2002. "The Distributional Aspects of Social Security and Social Security Reform," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226241067, August.
    16. Martin Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Aspects of Social Security and Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number feld02-1.
    17. Lerman, Robert I. & Yitzhaki, Shlomo, 1995. "Changing Ranks and the Inequality Impacts of Taxes and Transfers," National Tax Journal, National Tax Association;National Tax Journal, vol. 48(1), pages 45-59, March.
    18. 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.
    19. Amy Rehder Harris & John Sabelhaus, 2005. "How Does Differential Mortality Affect Social Security Finances and Progressivity? Working Paper 2005-05," Working Papers 16493, Congressional Budget Office.
    20. Michael D. Hurd & John B. Shoven, 1985. "The Distributional Impact of Social Security," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 193-222, National Bureau of Economic Research, Inc.
    21. Panis, C.W.A. & Lillard, L.A., 1996. "Socioeconomic Differentials in the Returns to Social Security," Papers 96-05, RAND - Labor and Population Program.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fatih Guvenen & Greg Kaplan & Jae Song & Justin Weidner, 2017. "Lifetime Incomes in the United States over Six Decades," NBER Working Papers 23371, National Bureau of Economic Research, Inc.
    2. Glaubitz, Rick & Harnack-Eber, Astrid & Wetter, Miriam, 2022. "The gender gap in lifetime earnings: The role of parenthood," Discussion Papers 2022/3, Free University Berlin, School of Business & Economics.
    3. Joshua Blonz & Dallas Burtraw & Margaret Walls, 2012. "Social safety nets and US climate policy costs," Climate Policy, Taylor & Francis Journals, vol. 12(4), pages 474-490, July.
    4. Coronado Julia Lynn & Fullerton Don & Glass Thomas, 2011. "The Progressivity of Social Security," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-45, November.
    5. Rick Glaubitz & Astrid Harnack-Eber & Miriam Wetter, 2022. "The Gender Gap in Lifetime Earnings: The Role of Parenthood," Discussion Papers of DIW Berlin 2001, DIW Berlin, German Institute for Economic Research.
    6. Ignacio à lvarez & Natalia da Silva & à lvaro Forteza & Ianina Rossi, 2012. "Incentivos y patrones de retiro en Uruguay," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(2), pages 219-271.
    7. Kuhle, Wolfgang, 2012. "Dynamic efficiency and the two-part golden rule with heterogeneous agents," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 992-1006.
    8. Ianina Rossi, 2018. "Systematic Determinants of Pensions in Latin America," Documentos de Trabajo (working papers) 0818, Department of Economics - dECON.

    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. Jeffrey B. Liebman, 2002. "Redistribution in the Current U.S. Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 11-48, National Bureau of Economic Research, Inc.
    2. Coronado Julia Lynn & Fullerton Don & Glass Thomas, 2011. "The Progressivity of Social Security," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-45, November.
    3. Julia Lynn Coronado & Don Fullerton & Thomas Glass, 2002. "Long-Run Effects of Social Security Reform Proposals on Lifetime Progressivity," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 149-206, National Bureau of Economic Research, Inc.
    4. John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, "undated". "Social Security Money's Worth," Pension Research Council Working Papers 97-20, Wharton School Pension Research Council, University of Pennsylvania.
    5. Liqun Liu & Andrew J. Rettenmaier, 2003. "Social Security Outcomes by Racial and Education Groups," Southern Economic Journal, John Wiley & Sons, vol. 69(4), pages 842-864, April.
    6. Martin Feldstein, 2005. "Structural Reform of Social Security," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 33-55, Spring.
    7. Liebman, Jeffrey B. & Luttmer, Erzo F.P. & Seif, David G., 2009. "Labor supply responses to marginal Social Security benefits: Evidence from discontinuities," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1208-1223, December.
    8. Afonso, Luís Eduardo & Fernandes, Reynaldo, 2005. "Uma Estimativa dos Aspectos Distributivos da Previdência Social no Brasil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 59(3), July.
    9. Li Tan & Cory Koedel, 2019. "The Effects of Differential Income Replacement and Mortality on U.S. Social Security Redistribution," Southern Economic Journal, John Wiley & Sons, vol. 86(2), pages 613-637, October.
    10. Guan Gong & Anthony Webb, 2008. "Mortality Heterogeneity and the Distributional Consequences of Mandatory Annuitization," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(4), pages 1055-1079, December.
    11. 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.
    12. Gustman, Alan L. & Steinmeier, Thomas L., 2001. "How effective is redistribution under the social security benefit formula?," Journal of Public Economics, Elsevier, vol. 82(1), pages 1-28, October.
    13. Edward N. Wolff, 2005. "Is the Equalizing Effect of Retirement Wealth Wearing Off?," Economics Working Paper Archive wp_420, Levy Economics Institute.
    14. Jagadeesh Gokhale & Laurence J. Kotlikoff & Alexi Sluchynsky, 2002. "Does it pay to work?," Working Papers (Old Series) 0206, Federal Reserve Bank of Cleveland.
    15. Dennis Fredriksen & Nils Martin Stølen, 2015. "Life time pension benefits relative to life time contributions," Discussion Papers 825, Statistics Norway, Research Department.
    16. James E Duggan & Robert Gillingham & John S Greenlees, 2008. "Mortality and Lifetime Income: Evidence from U.S. Social Security Records," IMF Staff Papers, Palgrave Macmillan, vol. 55(4), pages 566-594, December.
    17. Julia Lynn Coronado & Don Fullerton & Thomas Glass, 1999. "Distributional Impacts of Proposed Changes to the Social Security System," NBER Chapters, in: Tax Policy and the Economy, Volume 13, pages 149-186, National Bureau of Economic Research, Inc.
    18. Jeffrey R. Brown, 2003. "Redistribution and Insurance: Mandatory Annuitization With Mortality Heterogeneity," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(1), pages 17-41, March.
    19. Dennis Fredriksen & Nils Martin Stølen, 2005. "Effects of demographic development, labour supply and pension reforms on the future pension burden," Discussion Papers 418, Statistics Norway, Research Department.
    20. Yuh, Yoonkyung & Yang, Jaehwan, 2011. "The Valuation and Redistribution Effect of the Korea National Pension," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 52(1), pages 113-142, June.

    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:nbr:nberwo:15070. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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.