Discuss the equity and efficiency effects of the following recent and proposed c

Question

Discuss the equity and efficiency effects of the following recent and proposed changs in the social security system and, where appropriate, provide alternative reforms directed at the same objective:

A) changing the formula by which social security benefits are calculated to reflect total contributions, not just the contributions in a limited number of years.

B) tougher eleigibilty standars for disability payments.

C) increasing the eligibility age for social security benefits.

D) Increasing benefits for those who retire later so that they receive the same expected present discounted value of benefits, regardless of age of retirement.

E) exempting those over the age of 65 from paying social security taxes.

F) lowering the cost of living adjustment for social security benefits.

Explanation / Answer

A it will increase efficiency and equity

B it will increase efficiency but reduce equity as some handicapped people are excluded

C will increase equity but not efficiency

D will increase equity while as efficiency will remain more or less same

E equity will reduce the se but efficiency will fall

F efficiency

G equity will increase but efficiency will fall

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