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Decomposition of effects of social security on private savings

Published online by Cambridge University Press:  15 March 2012

MINKI HONG
MINKI HONG
Affiliation:
Korea Labor Institute, Seoul, 150-740, Korea (e-mail: [email protected])
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Abstract

The main aim of this paper is to decompose the effects of social security on private savings and quantify to what extent each factor that impacts saving behavior account for the effects of social security. For this purpose, I estimate a stochastic dynamic model in which households facing income and survival uncertainty choose optimal levels of consumption, asset holdings and labor supply. In this model, social security pensions reduce private assets by less than 10%. Bequest and precautionary savings motives are the main reasons of this partial offset. Uncertainty on future benefits has no role to play on the effect.

Keywords

Social securitysavingsdynamic model
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 11 , Issue 3 , July 2012 , pp. 419 - 438
Copyright
Copyright © Cambridge University Press 2012

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