Brief Discussion on J Seligman’s

Health, Wealth, and Workforce Exit:

Disability Insurance & Individual Accounts

By Ping Wang

St John’s University

ARIA 2006, D.C.

08/08/2006 ARIA'06 Discussion 2

What Does the Paper Address

Disability insurance (DI) in the context of the proposed individual accounts (IA) of social security

08/08/2006 ARIA'06 Discussion 3

Comparison of Two Systems

• Benefit under Individual Accounts– Total transition to DC type– All equity investment

• Benefit under current Social Security system

08/08/2006 ARIA'06 Discussion 4

Alternate Designs

• The individual renders IA to the DI trust and the trust pays benefits to disabled individuals

• The DI trust contributes to IA of the disabled and the disabled receives benefits from own IA

08/08/2006 ARIA'06 Discussion 5

The Paper Sheds light on

• Whether the IA idea is to the advantage or disadvantage of DI,

• how individuals may response to alternate designs integrating IA and DI, and hence

• how IA proposal may affect the demand for DI.

08/08/2006 ARIA'06 Discussion 6

Questions Related

• The author compares account balances available upon retirement. However the amount of monthly benefit may also concern retirees. With current SS it is guaranteed. Is it guaranteed under the proposed IA?

• Does the investment strategy of the disabled group differ from that of general population, hence their accounts perform differently?

08/08/2006 ARIA'06 Discussion 7

Suggestions

• In the text give examples to help readers understand numeric entries in the tables

• Table 1 suggests IEA outperforms SSA most time. The comparison will be better apprehended if info is available on when the situation happens (e.g., when stock market is sluggish?)

08/08/2006 ARIA'06 Discussion 8

Minors

• Where is Table 1b?

• Some abbreviations are not clear in meaning, for instance SSI on page 16 and δ(partial derivative?) in equation 2, 3

• In eq 2 and 6, a right bracket ) is missing