Social Security Mitigation of the Great Recession

February 22nd, 2014
in econ_news, syndication

Econintersect:  A staff working paper from the Federal Reserve addresses the question of how the effects of the Great Recession were cushioned be the existence of Social Security.  The finding is that Social Security has a significant countercyclical impact in an economic downturn.


Follow up:


This paper quantifies the welfare implications of the U.S. Social Security program during the Great Recession. We find that the average welfare losses due to the Great Recession for agents alive at the time of the shock are notably smaller in an economy with Social Security relative to an economy without a Social Security program. Moreover, Social Security is particularly effective at mitigating the welfare losses for agents who are poorer, less productive, or older at the time of the shock. Importantly, in addition to mitigating the welfare losses for these potentially more vulnerable agents, we do not find any specific age, income, wealth or ability group for which Social Security substantially exacerbates the welfare consequences of the Great Recession. Taken as a whole, our results indicate that the U.S. Social Security program is particularly effective at providing insurance against business cycle episodes like the Great Recession.

Click on title page below to read the paper at [pdf]


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