Old, Sick, Alone, and Poor: A Welfare Analysis of Old-Age Social Insurance Programmes

All individuals face some risk of ending up old, sick, alone, and poor. Is there a role for social insurance for these risks and, if so, what is a good programme? A large literature has analysed the costs and benefits of pay-as-you-go public pensions and found that the costs exceed the benefits. Thi...

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Bibliographic Details
Published in:The Review of economic studies 2017-04, Vol.84 (2 (299)), p.580-612
Main Authors: BRAUN, R. ANTON, KOPECKY, KAREN A., KORESHKOVA, TATYANA
Format: Article
Language:English
Subjects:
Retirees
Risk assessment
Social security
Studies
United States
Welfare
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Summary:All individuals face some risk of ending up old, sick, alone, and poor. Is there a role for social insurance for these risks and, if so, what is a good programme? A large literature has analysed the costs and benefits of pay-as-you-go public pensions and found that the costs exceed the benefits. This article, instead, considers means-tested social insurance (MTSI) programmes for retirees such as Medicaid and Supplemental Security Income. We find that the welfare gains from these programmes are large. Moreover, the current scale of MTSI in the U.S. is too small in the following sense. If we condition on the current Social Security programme, increasing the scale of MTSI by 1/3 benefits both the poor and the affluent when a payroll tax is used to fund the increase.
ISSN:0034-6527
1467-937X
DOI:10.1093/restud/rdw016