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Journal of Economic Perspectives: Vol. 19 No. 2 (Spring 2005)
JEP Volume. 19, Issue 2 | 
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Structural Reform of Social Security
Article Citation
Feldstein, Martin. 2005. "Structural Reform of Social Security."
The Journal of Economic Perspectives,
19(2): 33-55.
DOI: 10.1257/0895330054048731
DOI: 10.1257/0895330054048731
Abstract
Governments around the world have enacted or are currently considering fundamental structural reforms of their Social Security pension programs. The key feature in these reforms is a shift from a pure pay-as-you-go tax-financed system, in which taxes on current workers are primarily distributed to current retirees, to a mixed system that combines pay-as-you-go benefits with investment-based personal retirement accounts. This paper discusses how such a mixed system could work in practice and how the transition to such a change could be achieved. It then analyzes the economic gains that would result from shifting to a mixed system. I turn next to the three problems that critics raise about any investment-based plan: administrative costs, risk, and income distribution. Finally, I comment on some of the ad hoc proposals for dealing with the financial problem of Social Security without shifting to an investment-based system.
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Authors
Feldstein, Martin
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