Chapter

Changing Progressivity as a Means of Risk Protection in Investment-Based Social Security

Edited by Andrew A. Samwick

in Social Security Policy in a Changing Environment

Published by University of Chicago Press

Published in print June 2009 | ISBN: 9780226076485
Published online February 2013 | e-ISBN: 9780226076508 | DOI: http://dx.doi.org/10.7208/chicago/9780226076508.003.0010
Changing Progressivity as a Means of Risk Protection in Investment-Based Social Security

Show Summary Details

Preview

This chapter illustrates the link between progressivity and risk using a stylized framework based on simulations of earnings trajectories and portfolio returns. The model used in the analysis focuses on a cohort of workers who should expect to have their traditional benefits reduced at some point when the Social Security system is restored to solvency. Direct restrictions on equity holding in PRAs are likely to prove unpopular, particularly among those whose opportunities are most broadened by the chance to invest their mandatory contributions in equities. Extending the current framework to allow for optimal, age-dependent portfolio allocations and for saving in accounts other than the PRAs would provide better estimates of the extent to which greater progressivity can protect low earners from investment risk and of the size of the welfare costs paid by higher earners for providing this protection.

Keywords: risk; progressivity; Social Security; PRA; cost; earnings

Chapter.  11956 words.  Illustrated.

Subjects: Public Economics

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.