TY  - JOUR
AU  - McGrattan,Ellen R.
AU  - Prescott,Edward C.
TI  - On Financing Retirement with an Aging Population
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18760
PY  - 2013
Y2  - February 2013
UR  - http://www.nber.org/papers/w18760
L1  - http://www.nber.org/papers/w18760.pdf
N1  - Author contact info:
Ellen McGrattan
Research Department
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN 55480
Tel: 612/204-5523
Fax: 612/204-5515
E-Mail: erm@mcgrattan.mpls.frb.fed.us

Edward C. Prescott
Arizona State University
Economics Department
P. O. Box 879801
Tempe, AZ 85287-9801
E-Mail: edward.prescott@asu.edu
AB  - A problem facing the United States is financing retirement consumption as its population ages. Policy analysts increasingly advocate savings-for-retirement systems, but are concerned with insufficient savings opportunities with limited government debt. This concern is unwarranted. First, there is more productive capital than commonly assumed in macroeconomic modeling. Second, if the policy reform subsumes the elimination of capital income taxes, then the value of business equity increases relative to the capital stock. Phasing in a switch from the current U.S. system to a savings-for-retirement system without capital income taxes increases welfare of all current and future cohorts.
ER  -