This paper examines how political constraints can shape the social security system under different demographics. A steady-state mapping between relevant economic and demographic variables and the social security tax rate resulting from a majority voting is provided. I calibrate an OLG model to the U.S. economy. Calculations using census population and survival probabilities projections and 1961]96 labor productivity growth deliver a social security tax rate of 13.3% currently 11.2%.and a 54% replacement ratio 51.7%.. This result reflects the median voter’s aging, from 44 to 46 years, which dominates the decrease in the dependency ratio, from 5.45 to 4.72.
The U.S. Social Security System: What Does Political Sustainability Imply?
GALASSO, VINCENZO
1999
Abstract
This paper examines how political constraints can shape the social security system under different demographics. A steady-state mapping between relevant economic and demographic variables and the social security tax rate resulting from a majority voting is provided. I calibrate an OLG model to the U.S. economy. Calculations using census population and survival probabilities projections and 1961]96 labor productivity growth deliver a social security tax rate of 13.3% currently 11.2%.and a 54% replacement ratio 51.7%.. This result reflects the median voter’s aging, from 44 to 46 years, which dominates the decrease in the dependency ratio, from 5.45 to 4.72.
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