Social Security Reforms: Benefit Claiming, Labor Force Participation, and Long-run Sustainability

This paper develops a general equilibrium life-cycle model with endogenous labor supply in both intensive and extensive margins, consumption, saving, and benefit claiming to measure the long-run effects of a proposed Social Security reform. Agents in the model face medical expenditure, wage, health,...

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Bibliographic Details
Published in:American economic journal. Macroeconomics 2012-07, Vol.4 (3), p.96-127
Main Authors: İmrohoroğlu, Selahattin, Kitao, Sagiri
Format: Article
Language:English
Subjects:
Age
Capital stock
Central banks
Consumption
Dynamic programming
Economic models
Economic reform
Economic statistics
Economic theory
Equilibrium
Expenditures
Health care policy
Health expenditures
Health insurance
Health status
Labor force
Labor supply
Life cycles
Macroeconomics
Medical research
Medicare
Reforms
Retirement
Retirement age
Social security
Social Security benefits
Solvency
Studies
Sustainability
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Summary:This paper develops a general equilibrium life-cycle model with endogenous labor supply in both intensive and extensive margins, consumption, saving, and benefit claiming to measure the long-run effects of a proposed Social Security reform. Agents in the model face medical expenditure, wage, health, and survival shocks. Raising the normal retirement age by two years increases labor supply by 2.8 percent and the capital stock by 12.6 percent, showing that both margins of adjustment are critical. General equilibrium effects are important to account for the effects of reform on savings, although the effects on labor supply are less important.
ISSN:1945-7707
1945-7715
DOI:10.1257/mac.4.3.96