Rethinking the World Bank's social insurance analysis
Kotlikoff, Laurence J.
This paper reviews the Bank's social insurance analysis by describing fiscal fundamentals and discussing their measurement and relationship to social insurance. The fiscal fundamentals involve the level and composition of government spending, the government's inter- and intragenerational distribution policy, the structure of economic incentives, and the extent of risk pooling. The paper contains four sections. The first section describes fiscal fundamentals and their relationship to social insurance. The second examines insurance aspects of social insurance. The third uses the case of the United States to illustrate the concerns about assessing social insurance. Each of these sections points out shortcomings with respect to the Bank's social insurance analysis and suggests the appropriate framework for future Bank fiscal policy (including social insurance) analysis. The final section recommends: 1) the Bank conduct systemic long-term fiscal planning and analysis that exposes the fiscal treatment of different generations as well as groups within generations; 2) the Bank prepare comprehensive assessments of total effective marginal taxes on particular activities in its client countries; 3) systematic measurement and analysis of risk-pooling in client countries; 4) the Bank take active role in collecting the data needed for these analyses; and 5) the Bank adopt the broad framework for fiscal policy analysis as a means of conducting policy dialogue with client countries.
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