Tuesday, August 19, 2008

New paper: Adjusting Government Policies for Age Inflation

The NBER has released a new working paper by John Shoven of Stanford and Gopi Shah Goda of Harvard entitled Adjusting Government Policies for Age Inflation. Here' the abstract, followed by a link:

Government policies that are based on age do not adjust to the fact that a given age is associated with a higher remaining life expectancy and lower mortality risk relative to earlier time periods due to improvements in mortality. We examine four possible methods for adjusting the eligibility ages for Social Security, Medicare, and Individual Retirement Accounts to determine what eligibility ages would be today and in 2050 if adjustments for mortality improvement were taken into account. We find that historical adjustment of eligibility ages for age inflation would have increased ages of eligibility by approximately 0.15 years annually. Failure to adjust for mortality improvement implies the percent of the population eligible to receive full Social Security benefits and Medicare will increase substantially relative to the share eligible under a policy of age adjustment.


Update: The Wall Street Journal has a story on this paper.


Patrick R. Sullivan said...

Shoven, along with George Shultz, has a new book on entitlement reform.

Andrew G. Biggs said...

Thanks, Patrick -- I should have caught that.