The Effect of Social Security on Personal and Private Saving in the Short Run and the Long Run: A Time Series Analysis

Abstract

This paper investigates the impact of social security payments on personal and private savil)-g in the U.S. in the short run and the long run. Annual data ranging from 1959 to 2003 are used to investigate this relationship. The long run investigation of the relationship between Social Security and saving is undertaken within the confines of Johansen's (1988) testing framework. Its results indicate that Social Security and personal and private saving are related in the long run. Vector error correction (VEC) estimation is used to analyze the impact ofSocial Security on personal and private saving in the short run. The test results indicate that Social Security has a negative causal impact on saving in the short run. (H55)