LEADER 03354oam 22004333a 450 001 9910702926203321 005 20230622022822.0 035 $a(NBER)w6430 035 $a(CKB)3240000000021829 035 $a(OCoLC)681741984 035 $a(EXLCZ)993240000000021829 100 $a20230622d1998 fy 0 101 0 $aeng 135 $aurcnu|||||||| 181 $ctxt$2rdacontent 182 $cc$2rdamedia 183 $acr$2rdacarrier 200 10$aOpting Out of Social Security and Adverse Selection /$fLaurence J. Kotlikoff, Kent A. Smetters, Jan Walliser 210 $aCambridge, Mass$cNational Bureau of Economic Research$d1998 210 1$aWashington, DC :$cCongressional Budget Office,$d[1998] 215 $a1 online resource$cillustrations (black and white); 225 1 $aNBER working paper series$vno. w6430 300 $aFebruary 1998. 320 $aIncludes bibliographical references. 330 3 $aThis paper compares two general methods of privatization social security: forced participation in the new privatized system vs. letting people choose between the new system or staying in social security (i.e., opting out). Simulations are performed using a large scale perfect-foresight OLG simulation model that incorporates both intra-generational and inter-generational heterogeneity. The decision of any agent to opt out is endogenous and depends on the opting out decisions of all other agents vis-...-vis factor prices. Various tax bases are considered in financing the transition path, as well as the perceived tax-benefit linkage due to the informational problems inherent in many social security systems. We consider two cases: full and no perception Both methods of privatizing social security lead to large long- run gains for all lifetime income classes despite the intra-generational progressivity of social security, but differ in their short run effects due to adverse selection associated with opting out. Adverse selection is a key reason why many economists oppose opting out and why many plans to privatize social security systems mandate participation. This paper, however, shows this wisdom to be wide of the mark. Opting out is better at protecting the welfare of the initial elderly, even though forced participation protects their real value of social security benefits because opting out continues to collect payroll tax revenue from those who stay with social security. Opting out can mean quicker transition paths by reducing social security wealth faster than forced participation, because many will forfeit their accrued claims as the price of opting out. Yet opting out, along with a decrease in the payroll tax rate is better at shifting the burden to future workers who benefit from privatization. 410 0$aWorking Paper Series (National Bureau of Economic Research)$vno. w6430. 606 $aSocial Security and Public Pensions$2jelc 615 7$aSocial Security and Public Pensions 686 $aH55$2jelc 700 $aKotlikoff$b Laurence J$0124852 701 $aSmetters$b Kent A$01363736 701 $aWalliser$b Jan$01143280 712 02$aNational Bureau of Economic Research. 801 0$bMaCbNBER 801 1$bMaCbNBER 906 $aBOOK 912 $a9910702926203321 996 $aOpting Out of Social Security and Adverse Selection$93386778 997 $aUNINA