Abstract
The extended life-cycle model shows that the impact of social security on private savings depends on two opposing effects: wealth replacement and induced retirement. The net impact can be determined only empirically. The current study uses data for a cross-sectional sample of developed countries so as to evaluate both effects. The evidence indicates that increases in the extent of social security coverage and in the relative level of benefits substantially depress the rate of private saving.
This research is part of a larger study of the effects of fiscal policies on capital formation and income distribution. The author is grateful to the National Science Foundation for financial support; to Larry Summers and Marie-Paul Donsimoni for assistance with the research; and to Franco Modigliani for discussions. Helpful comments on an earlier version of this paper were made by members of the Harvard Public Finance Seminar and by participants in the International Economic Association conference on the economics of public services, held in Turin, Italy.
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© 1977 International Economic Association
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Feldstein, M.S. (1977). Social Security and Private Savings: International Evidence in an Extended Life-Cycle Model. In: Feldstein, M.S., Inman, R.P. (eds) The Economics of Public Services. International Economic Association Conference Volumes. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-02917-4_8
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DOI: https://doi.org/10.1007/978-1-349-02917-4_8
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