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

FRB Atlanta Working Paper Series 2013-2a

65 Pages Posted: 22 Mar 2015

See all articles by R. Braun

R. Braun

Federal Reserve Bank of Atlanta

Karen A. Kopecky

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Tatyana Koreshkova

University of Iowa - Henry B. Tippie College of Business - Department of Economics

Date Written: February 2015

Abstract

Poor heath, large acute and long-term care medical expenses, and spousal death are significant drivers of impoverishment among retirees. We document these facts and build a rich, overlapping generations model that reproduces them. We use the model to assess the incentive and welfare effects of Social Security and means-tested social insurance programs such as Medicaid and food stamp programs, for the aged. We find that U.S. means-tested social insurance programs for retirees provide significant welfare benefits for all newborn. Moreover, when means-tested social insurance benefits are of the scale in the United States, all individuals would prefer to be born into an economy with no Social Security. Finally, we find that the benefits of increasing means-tested social insurance are small or negative, if we hold fixed Social Security contributions and benefits at their current levels.

Keywords: Social Security, Medicaid, social insurance, elderly, medical expenses

JEL Classification: E62, H31, H52, H55

Suggested Citation

Braun, R. and Kopecky, Karen A. and Koreshkova, Tatyana, Old, Sick, Alone, and Poor: A Welfare Analysis of Old-Age Social Insurance Programs (February 2015). FRB Atlanta Working Paper Series 2013-2a, Available at SSRN: https://ssrn.com/abstract=2359201 or http://dx.doi.org/10.2139/ssrn.2359201

R. Braun (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Karen A. Kopecky

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Tatyana Koreshkova

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

108 Pappajohn Building
Iowa City, IA 52242
United States

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