Transfer Payments and the Macroeconomy: The Effects of Social Security Benefit Increases, 1952-1991
- (pp. 1-42)
(Complimentary)
Abstract
This paper uses Social Security benefit increases from 1952 to 1991 to investigate the macroeconomic effects of changes in transfers. It finds a large, immediate, and significant positive response of consumption to permanent benefit increases. The response declines after about five months, and does not appear to spread to industrial production or employment. The effects of transfers are faster, but much less persistent and much smaller overall, than those of tax changes. Finally, monetary policy responds strongly to benefit increases but not to tax changes. This may account for the failure of the effects of transfers to persist or spread.Citation
Romer, Christina D., and David H. Romer. 2016. "Transfer Payments and the Macroeconomy: The Effects of Social Security Benefit Increases, 1952-1991." American Economic Journal: Macroeconomics, 8 (4): 1-42. DOI: 10.1257/mac.20140348Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E62 Fiscal Policy
- E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- H31 Fiscal Policies and Behavior of Economic Agents: Household
- H55 Social Security and Public Pensions
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