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Social Security, Benefit Claiming, and Labor Force Participation: A Quantitative General Equilibrium Approach

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  • Selo Imrohoroglu

    (University of Southern California)

Abstract

We build a general equilibrium model with endogenous saving, labor force participation, work hours and social security benefit claiming, in which overlapping generations of individuals face income, survival and health expenditure risks in incomplete markets. We use the model to study the impact of three Social Security reforms; reduction in benefits and payroll taxes, increase in the early retirement age from 62 to 64 and increase in the normal retirement age from 66 to 68. We show that a reform can have a significant effect on the budget of the Social Security through the changes in savings as well as the benefit claiming and labor force participation. When the projected aging of the population is taken into account, the case for a reform that encourages labor force participation of the elderly becomes stronger.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 215.

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Date of creation: 2011
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Handle: RePEc:red:sed011:215

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Cited by:
  1. Edward Prescott & Ellen McGrattan, 2013. "On Financing Retirement with an Aging Population," 2013 Meeting Papers, Society for Economic Dynamics 61, Society for Economic Dynamics.
  2. Minchung Hsu, 2013. "Health Insurance and Precautionary Saving: A Structural Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 511-526, July.
  3. Rodolfo E. Manuelli & Adrian Peralta-Alva, 2011. ""Frictions in financial and labor markets": a summary of the 35th Annual Economic Policy Conference," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue July, pages 273-292.

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