TY  - JOUR
AU  - Abel,Andrew B.
TI  - The Effects of Investing Social Security Funds in the Stock Market When Fixed Costs Prevent Some Households from Holding Stocks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7739
PY  - 2000
Y2  - June 2000
UR  - http://www.nber.org/papers/w7739
L1  - http://www.nber.org/papers/w7739.pdf
N1  - Author contact info:
Andrew B. Abel
Wharton School
University of Pennsylvania
2315 Steinberg Hall - Dietrich Hall
Philadelphia, PA  19104-6367
Tel: 215/898-4801
Fax: 215/573-7244
E-Mail: abel@wharton.upenn.edu
AB  - With fixed costs of participating in the stock market, consumers with high income will participate in the stock market, but consumers with lower income will not participate.  If a fully-funded defined-contribution social security system tries to exploit the equity premium by selling a dollar of bonds per capita and buying a dollar of equity per capita, consumers who save but do not participate in the stock market will increase their consumption, thereby reducing saving and capital accumulation. Calibration of a general equilibrium model indicates that this policy could reduce the aggregate capital stock substantially, by about 50 cents per capita.
ER  -