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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