Citation URL: http://www.urban.org/KentSmetters

Policymakers need to understand how Social Security reforms affect income distribution. Existing models range from simple representations of career earnings of typical workers to complex general equilibrium models. Population micro-simulation models, which project the earnings, wealth, and demographic histories of a representative sample of families, are useful for simulating many reform proposals. This report evaluates one such model - the projected cohorts model - and then discusses in detail three important issues in model development: 1) representing saving behavior, 2) capturing macro-economic effects, and 3) accounting for risk and uncertainty.

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