Social Security and Aggregate Capital Accumulation Revisited

This paper reexamines Feldstein's (1974) results of the effect of social security on private capital accumulation in the context of a simultaneous-equation model. The model incorporates dynamic feedback effects and is estimated by FIML to incorporate theoretical restrictions that are tested against the data. It is simulated as a full dynamic model to analyze the long-run effect of SSW on private capital accumulation. The effects are in the same direction as Feldstein, but considerably weaker.