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Social Security Incentives and Human Capital Investment

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  • Morten I. Lau
  • Panu Poutvaara

Abstract

While the effect of social security systems on retirement decisions has received much attention, the impact of these systems on individuals’ incentives to invest in their human capital has not been analyzed. We integrate human capital investment and retirement decisions in a simple analytical life-cycle model with full certainty and investigate how different social security schemes may a¤ect welfare, human capital investment and labor supply. We analyze and compare three different social security systems. Our results suggest that actuarial adjustment and the link between individual social security contributions and benefits increase human capital investment and postpone retirement.

Suggested Citation

  • Morten I. Lau & Panu Poutvaara, 2001. "Social Security Incentives and Human Capital Investment," CESifo Working Paper Series 438, CESifo.
    • Handle: RePEc:ces:ceswps:_438
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    References listed on IDEAS

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    Cited by:

    1. Tim Krieger & Thomas Lange, 2012. "Education, Life Expectancy and Pension Reform," Hacienda Pública Española / Review of Public Economics, IEF, vol. 202(3), pages 31-55, September.
    2. Poutvaara, Panu, 2007. "Social security incentives, human capital investment and mobility of labor," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1299-1325, August.
    3. Benos, Nikos, 2009. "Fiscal policy and economic growth: empirical evidence from EU countries," MPRA Paper 19174, University Library of Munich, Germany.
    4. Montizaan, Raymond & Cörvers, Frank & De Grip, Andries, 2010. "The effects of pension rights and retirement age on training participation: Evidence from a natural experiment," Labour Economics, Elsevier, vol. 17(1), pages 240-247, January.
    5. Alexander Ludwig & Thomas Schelkle & Edgar Vogel, 2012. "Demographic Change, Human Capital and Welfare," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(1), pages 94-107, January.
    6. Michael Gorski & Tim Krieger & Thomas Lange, 2007. "Pensions, Education and Life Expectancy," Working Papers CIE 4, Paderborn University, CIE Center for International Economics.
    7. Walter Fisher & Christian Keuschnigg, 2010. "Pension reform and labor market incentives," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 769-803, March.
    8. Ann Barbara Bauer & Reiner Eichenberger, 2017. "Endogenous aging: How statutory retirement age drives human and social capital," CREMA Working Paper Series 2017-02, Center for Research in Economics, Management and the Arts (CREMA).
    9. Didier Fouarge & Trudie Schils, 2009. "The Effect of Early Retirement Incentives on the Training Participation of Older Workers," LABOUR, CEIS, vol. 23(s1), pages 85-109, March.
    10. Hupfeld, Stefan, 2009. "Rich and healthy--better than poor and sick?: An empirical analysis of income, health, and the duration of the pension benefit spell," Journal of Health Economics, Elsevier, vol. 28(2), pages 427-443, March.
    11. Christian Keuschnigg & Mirela Keuschnigg & Christian Jaag, 2011. "Aging and the Financing of Social Security in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(II), pages 181-231, June.
    12. Vogel, Edgar & Ludwig, Alexander & Börsch-Supan, Axel, 2011. "Aging and Pension Reform in a Two-Region World: The Role of Human Capital," MEA discussion paper series 11246, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    13. Christelle Garrouste & Omar Paccagnella, 2011. "Shall I stay or shall I go? Late graduation and retirement decision," Post-Print hal-03245583, HAL.
    14. Nikos Benos, 2005. "Fiscal Policy and Economic Growth: Empirical Evidence from OECD," University of Cyprus Working Papers in Economics 1-2005, University of Cyprus Department of Economics.

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    More about this item

    Keywords

    Social security; retirement; education; human capital; labor supply;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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