The US social security system faces funding pressure due to the aging of the US population. I develop two theories of bounded rationality called life-cycle
horizon learning and finite horizon life-cycle learning to explore the welfare cost of social security policy uncertainty. In the models, agents use adaptive expectations
to forecast future aggregates, such as wages and interest rates. This introduces cyclical dynamics along a transition path, which magnifies the welfare
cost of policy uncertainty, compared to a rational expectations model. The ex-ante welfare cost of policy uncertainty (where policy is either a tax or benefit change in 2030 or 2040) is equivalent to 1.99 percent of period consumption for the cohort of agents most harmed in the life-cycle horizon learning model compared to 1.49 percent in a rational expectations framework.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

MEER OVER NETSPAR


Missie en strategie           •           Netwerk           •           Organisatie           •          Podcasts
Board Brief            •            Werkprogramma 2023-2027           •           Onderzoeksagenda

OVER NETSPAR

Onze partners

vu
NN_logo_gray
B20190901_nidi-logo_greyscale
B20160708_apg
B20160708_ministeries
Bekijk al onze partners