Abstract
This article shows theoretically and empirically that an aggregate Euler equation relates the growth rate of per capita consumption to the real interest rate, the ratio of private wealth plus asset income to consumption, and the ratio of social security wealth to consumption. Using the estimated Euler equation, the paper then calculates the steady‐state effects of social security reform. Reforms that reduce the ratio of social security wealth to consumption are found to shift the balanced growth paths for the capital stock, output, and consumption upward appreciably.
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