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How Well Does the U.S. Social Insurance System Provide Social Insurance? | Journal of Political Economy: Vol 118, No 1
Source: journals.uchicago.edu
Article summary:
1. This article examines how well the U.S. social insurance system provides social insurance, by comparing it to a stylized version of the system and a planning problem.
2. The analysis finds that the maximum welfare gain to improved insurance in the permanent-shock model is large, equivalent to a 4.09 percent increase in consumption each model period.
3. Two main reforms are explored: an optimal piecemeal reform and an optimal present-value tax, which achieves a welfare gain of 3.95 percent of consumption in the permanent-shock model but no welfare gain in the full model.
Article analysis:
The article is generally reliable and trustworthy, as it is based on research from prominent economists such as Mirrlees (1995), Rosen (2002), Economic Report of the President (2004), Kaplan (2007), Heathcote et al (2008). It also cites relevant literature from dynamic contract theory and social security systems with idiosyncratic risk, such as Hopenhayn & Nicolini (1997), Wang & Williamson (2002), Golosov & Tsyvinski (2006), Imrohoroglu et al (1995), Huggett & Ventura (1999), Storesletten et al (1999) and Nishiyama & Smetters (2007).
The article does not appear to be biased or one-sided, as it presents both sides of the argument fairly and objectively. It also does not appear to contain any unsupported claims or missing points of consideration; all claims are backed up by evidence from relevant sources, while all points of consideration are discussed thoroughly throughout the article. Furthermore, there are no unexplored counterarguments or promotional content; all counterarguments are addressed adequately, while there is no promotional content present in the article at all.
Finally, possible risks are noted throughout the article; for example, when discussing an optimal piecemeal reform without changing social security tax rate or income tax system, it notes that this leads to almost no welfare gain in permanent-shock model but a welfare gain equivalent to 1.15% consumption increase each period in full model - indicating potential risks associated with this reform option. Additionally, when discussing an optimal present-value tax reform eliminating model social insurance system and replacing it with an optimal tax on present value of earnings, it notes that this performs well for models with only permanent labor productivity differences but not for models with permanent persistent and temporary sources of labor productivity variation - again