A LONG-RUN SIMULATION-MODEL FOR ANALYZING SOCIAL-SECURITY RETIREMENT POLICIES

This paper analyses social security retirement policy using a simple l ong-run simulation model which incorporates lifecycle consumption beha viour. Three policy alternatives are considered: 1 a validation policy in which the retirement of the baby boom generation is partially fina nced by an increase in national saving brought about by the projected build-up in the social security trust funds; 2 an offset policy in whi ch national saving does nor increase because the social security trust fund build-up is offset by increases in deficits of other government programmes; 3 a policy of cutting social security tares and returning the system to pay as you go. Each policy is judged by how it affects t he well-being of age cohorts alive at the start of the simulation.