Social Security and Saving: New Time Series Evidence

This paper reexamines the results of my 1974 paper on Social Security and saving with the help of an additional twenty-one years of data. The estimates presented here reconfirm that each dollar of Social Security wealth (SSW) reduces private saving by between two and three cents. The parameter estimates for the postwar period and for the entire sample since 1930 are very similar. The correction of the error in the original SSW series between 1958 and 1971 therefore does not significantly affect the original results. The estimated effect of SSW is robust with respect to the addition of a variety of variables that have been suggested in previous critiques of the original study. In the aggregate, the parameter values imply that the Social Security program currently reduces overall private saving by nearly 60 percent.