Macroeconomic implications of switching the social security trust fund towards a greater investment in equities

This paper shows that shifting the portfolio allocation of the social security trust fund towards more equity investment, ceteris paribus,reduces the aggregate capital stock asw ell asthe average consumption level of all individuals except the poor retirees who receive an increase but at the cost of a large increase in uncertainty. If a larger capital stock is desired, reducing the supply of publicly supplied goods is the most effective tool. That change also increases the average private consumption of all the young and the wealthy retirees although it does reduce the average consumption and uncertainty of the old non-savers.