Social security and unsecured debt ∗

@inproceedings{Hurst2003SocialSA,
  title={Social security and unsecured debt ∗},
  author={E. Jan Hurst and Paul Willen},
  year={2003}
}
Most young households simultaneously hold both unsecured debt on which they pay an average of 10 percent interest and social security wealth on which they earn less than 2 percent. We document this fact using data from the Panel Study of Income Dynamics. We then consider a life-cycle model with optimizing and “rule-of-thumb” households and explore ways to reduce this inefficiency. We show that both allowing households to use social security wealth to pay off debt and exempting young households… CONTINUE READING
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