TY  - JOUR
AU  - Diamond,Peter
TI  - Administrative Costs and Equilibrium Charges with Individual Accounts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7050
PY  - 1999
Y2  - March 1999
UR  - http://www.nber.org/papers/w7050
L1  - http://www.nber.org/papers/w7050.pdf
N1  - Author contact info:
Peter A. Diamond
15 Franklin Rd
Lexington, MA 02420
Tel: 617/253-3363
Fax: 617/253-1330
E-Mail: pdiamond@mit.edu
M1  - published as Peter A. Diamond. "Administrative Costs and Equilibrium Charges with Individual Accounts," in John B. Shoven, editor, "Administrative Aspects of Investment-Based Social Security Reform" University of Chicago Press (2000)

AB  - There are many individual account proposals. For government-organized accounts, the government arranges for both record-keeping and investment management.  For privately-organized accounts, individuals directly select private firms to do these tasks. The government spreads the costs of government-organized accounts among accounts, outside sources of revenue, employers and workers.  With privately-organized accounts, equilibrium prices reflect selling costs as well as administrative costs.  Thus, government-organized accounts are organized on a group basis while privately-organized accounts are organized on an individual basis. In financial and insurance markets generally, the group and individual markets function very differently and yield different pricing structures. The paper describes a low cost/low services government-organized plan and estimates that it might cost $40-50 per worker per year. The nature of equilibrium with privately-organized accounts is discussed, with the conclusion that the costs would be very high compared to the cost of government organization.
ER  -