Working Paper: NBER ID: w1361
Authors: R. Glenn Hubbard
Abstract: The entitlement to social security retirement benefits is a major component of aggregate household wealth. This paper focuses on the impact of social security annuities on household portfolio allocation, extending existing optimizing models of portfolio allocation to explicitly consider the role of social security. The model is implemented using cross-section data. The partial equilibrium impacts of changes in social security benefits on portfolio choice and composition are small but precisely measured. The general equilibrium impacts on asset markets of a social security policy change (focusing onlinks between social security and dynamic wealth accumulation and between social security benefits and private pension benefits) are generally much larger.
Keywords: Social Security; Household Portfolio Allocation; Wealth Accumulation; Pension Benefits
JEL Codes: H55; D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social security wealth (H55) | allocation of nonpension wealth (D14) |
| increase in social security wealth (H55) | decrease in demand for other assets (G19) |
| marginal tax rate (H21) | choice of assets (G11) |
| social security wealth (H55) | holdings of housing and equities (R21) |
| social security wealth (H55) | savings bonds and deposits (D14) |
| general equilibrium impact of social security (H55) | portfolio allocation (G11) |