SOCIAL-SECURITY AND HOUSEHOLD WEALTH-ACCUMULATION - REFINED MICROECONOMETRIC EVIDENCE

This study examines the relationship between social security wealth and fungible wealth using relatively recent micro data. We find that a ceteris paribus increase in social security wealth has no effect on fungible wealth, suggesting that Ricardian equivalence holds. Of the individual wealth categories comprising fungible wealth, only pension wealth is negatively and significantly affected by an increase in social security wealth and, if some of this pension wealth is not fully funded, Ricardian equivalence will not hold. We conclude therefore that the social security system might adversely affect capital accumulation, but not necessarily to the degree suggested by others.