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The Joint Labor Supply Decision of Married Couples and the Social Security Pension System

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  • Shinichi Nishiyama

    (Georgia State University)

Abstract

The current U.S. Social Security program redistributes resources from high wage workers to low wage workers and from two-earner couples to one-earner couples. The present paper extends a standard general-equilibrium overlapping-generations model with uninsurable wage shocks to analyze the effect of spousal and survivors benefits on the labor supply of married couples. The heterogeneous-agent model calibrated to the 2009 U.S. economy predicts that removing spousal and survivors benefits would increase female market work hours by 4.3-4.9% and total output by 1.1-1.5% in the long run, depending on the government financing assumption. If the increased tax revenue due to higher economic activity after the policy change was redistributed in a lumpsum manner, a phased-in cohort-by-cohort removal of these benefits would make all current and future age cohorts on average better off.

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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp229.

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Length: 48 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:mrr:papers:wp229

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  1. Conesa, Juan Carlos & Kitao, Sagiri & Krueger, Dirk, 2006. "Taxing capital? Not a bad idea after all!," CFS Working Paper Series 2006/21, Center for Financial Studies (CFS).
  2. Claudia Olivetti, 2005. "Changes in Women's Hours of Market Work: The Role of Returns to Experience," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-008, Boston University - Department of Economics, revised Jun 2006.
  3. Hong, Jay H. & Rios-Rull, Jose-Victor, 2007. "Social security, life insurance and annuities for families," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 118-140, January.
  4. Jeffrey R. Brown & James M. Poterba, 1999. "Joint Life Annuities and Annuity Demand by Married Couples," NBER Working Papers 7199, National Bureau of Economic Research, Inc.
  5. Shinichi Nishiyama & Kent Smetters, 2007. "Does Social Security Privatization Produce Efficiency Gains?," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1677-1719, November.
  6. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-91, April.
  7. Orazio Attanasio & Hamish Low & Virginia Sanchez-Marcos, 2008. "Explaining Changes in Female Labor Supply in a Life-Cycle Model," American Economic Review, American Economic Association, vol. 98(4), pages 1517-52, September.
  8. Gouveia, Miguel & Strauss, Robert P., 1994. "Effective Federal Individual Tax Functions: An Exploratory Empirical Analysis," National Tax Journal, National Tax Association, vol. 47(2), pages 317-39, June.
  9. Kaygusuz, Remzi, 2011. "Social security and two-earner households," MPRA Paper 32358, University Library of Munich, Germany.
  10. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
  11. Laurence J. Kotlikoff & Kent Smetters & Jan Walliser, 1999. "Privatizing Social Security in the U.S. -- Comparing the Options," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 532-574, July.
  12. Mark Huggett & Juan Carols Parra, 2006. "How Well Does the US Social Insurance System Provide Social Insurance?," Working Papers gueconwpa~06-06-11, Georgetown University, Department of Economics.
  13. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
  14. B. Douglas Bernheim & Lorenzo Forni & Jagadeesh Gokhale & Laurence J. Kotlikoff, 2003. "The Mismatch Between Life Insurance Holdings and Financial Vulnerabilities: Evidence from the Health and Retirement Study," American Economic Review, American Economic Association, vol. 93(1), pages 354-365, March.
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Cited by:
  1. Kaygusuz, Remzi, 2011. "Social security and two-earner households," MPRA Paper 32358, University Library of Munich, Germany.

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