The goal of this paper is to determine the effects of different social security regimes on job search. A less generous pension system induces higher savings across the life cycle and makes agents wealthier and thus more reluctant to accept low wage offers. On the other hand, as the social security system provides insurance against labor shocks, such as layoffs and future unemployment spells, a less generous system induces agents to accept bad job offers to save for retirement. To determine the strength of each effect, we develop a life-cycle overlapping generations model with job search, savings and a fully funded social security system. After obtaining the parameters that match the predicted moments to the observed path of employment states, wages, and assets, we compute the effects of alternative social security regimes in the U.S. economy.
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Find related papers by JEL classification: E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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