Abstract
How will the distribution of welfare, consumption, and leisure across households be affected by social security reform? This paper addresses this question for social security reforms with a two-tier structure by comparing steady states under a realistic version of the current U.S. system and under the two-tier system. The first tier is a mandatory, defined-contribution pension offering a retirement annuity proportional to the value of taxes paid, whereas the second tier guarantees a minimum retirement income. Our findings, which are summarized in the Introduction, do not in general favor the implementation of pay-as-you go versions of the two-tier system for the U.S. economy. Journal of Economic Literature Classification Numbers: D3, E6.
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