Modeling the Macroeconomic Implications of Social Security Reform

John P. Laitner
2001 Social Science Research Network  
Executive Summary Two models dominate the economics literature on why people save (and hence on why they accumulate wealth). In one, the life-cycle model, people save when they are young in order to have funds to support their retirement. In the other, the dynastic model, households save to build estates to pass to their descendants. From the standpoint of public policy analysis, the two models can have quite different predictions. It is also the case that research shows that either model by
more » ... elf has shortcomings in describing actual savings behavior. In this Issues in Brief, I summarize how one might combine the two basic models, what advantages the combined framework might have in matching empirical evidence, and what implications for public policy -specifically Social Security reform -the combined model might have.
doi:10.2139/ssrn.1084589 fatcat:hcqdyl63p5hrhjwl6rgexgddzq