Risk and Distribution Issues in Social Security Reform.

• Position: Meeting held by the National Bureau of Economic Research

During the NBER's 1998 Summer Institute, NBER President Martin S. Feldstein, also of Harvard University, organized a meeting on "Risk and Distribution Issues in Social Security Reform." The August 5 program was:

Jeffrey B. Liebman, NBER and Harvard University, "Redistribution in the Current U.S. Social Security System"

Julia Lynn Coronado, Federal Reserve Board; Don Fullerton, NBER and University of Texas at Austin; and Tom Glass, University of Texas at Austin, "Distributional Consequences of Proposed Changes to the Social Security System"

Robert J. Shiller, NBER and Yale University, "Social Security and Institutions for Intergenerational, Intragenerational, and International Risk Sharing" (NBER Working Paper No. 6641)

Martin S. Feldstein, and Elena Ranguelova, Harvard University, "Individual Risk and Intergenerational Risk Sharing in an Investment-based Social Security System"

Kent Smetters, Congressional Budget Office and University of Pennsylvania, "Privatizing Versus Prefunding Social Security in a Stochastic Economy"

Andrew B. Abel, NBER and University of Pennsylvania, "The Aggregate Effects of Including Equities in the Social Security Trust Fund"

Coronado, Fullerton, and Glass assess the degree to which the current Social Security system redistributes income from rich to poor and estimate the impact of various proposed changes on that redistributive effect. The authors measure redistribution on a lifetime basis using estimated earnings profiles for a sample taken from the Panel Study of Income Dynamics. Their results indicate that the current Social Security system redistributes less than is generally perceived, mainly because people with higher incomes live longer and therefore draw benefits longer. They also find that many of the proposed changes to Social Security have surprisingly little effect on the redistribution inherent in the system.

Social Security's old-age insurance systems are devices for the sharing of income risks of the elderly. Shiller describes barriers that exist for individuals sharing their risks intergenerationally (with young people in the same country), intragenerationally (with other elderly in the same country), and internationally (with foreigners). He then considers the optimal design of government-sponsored social security systems in light of these barriers. He concludes that benefits for each retired person may be tied to that person's lifetime income without causing aggregate benefits for all existing...