Work

Social Security Investment in Equities

Year: 2003

Type: article

Abstract: This paper explores the general-equilibrium impact of social security portfolio diversification into private securities, either through the trust fund or private accounts. The analysis depends critically on heterogeneities in saving, production, assets, and taxes. Limited diversification weakly increases interest rates, reduces the expected return on short-term investment (and the equity premium), decreases safe investment, increases risky investment, and increases a suitably weighted social welfare function. However, the effects on aggregate investment, long-term capital values, and the utility of young savers hinges on assumptions about technology. Aggregate investment and long-term asset values can move in opposite directions.

Source: American Economic Review

DOI: 10.1257/000282803769206197

Authors: Peter Diamond, John Geanakoplos

Institutions: National Bureau of Economic Research, Ifo Institute for Economic Research, Massachusetts Institute of Technology, Santa Fe Institute, Yale University

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1986125693

FWCI: 18.48

Cites: 12

Cited by: 74

Related to: 10