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Social Security, Endogenous Retirement, and Intrahousehold Cooperation

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  • Laura Turner

    (University of Toronto)

  • Giovanni Gallipoli

    (University of British Columbia)

Abstract

This paper studies the retirement incentives generated by the U.S. Social Security system in a framework which allows for different degrees of cooperation and strategic interaction between spouses. We examine the relative empirical performance of models specified under different assumptions about spouses' preferences (specifically over complementarities in leisure during retirement) and commitment to a jointly optimal retirement path. We assess the models' relative ability to replicate a large set of economic choices observed at or around the time of retirement. These choices include the tendency of individuals to retire close to the first availability of regular Social Security retirement benefits; for spouses to retire approximately at the same time; and for transitions into retirement to be made either through "bridge jobs" -- exit from a full-time career job several years before full retirement -- or through application for Social Security disability benefits. Our results suggest a role for non-cooperative behavior in households in which main-earners are subject to large transfer liabilities towards second-earners, which effectively introduce a `tax wedge' on earned income and affect both labor supply and retirement decisions. The different models also suggest different welfare implications for current Social Security policy in partial equilibrium, with the utility value of most features of the current system increasing with spousal complementarity in leisure, but decreasing in the degree non-cooperation between household members approaching retirement.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 935.

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Date of creation: 2011
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Handle: RePEc:red:sed011:935

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  1. Alan L. Gustman & Thomas L. Steinmeier, 2004. "Personal Accounts and Family Retirement," Working Papers wp067, University of Michigan, Michigan Retirement Research Center.
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  16. Kreider, Brent, 1999. "Social Security Disability Insurance: Applications, Awards, and Lifetime Income Flows," Staff General Research Papers 5188, Iowa State University, Department of Economics.
  17. Campolieti, Michele, 2002. "Disability and the labor force participation of older men in Canada," Labour Economics, Elsevier, vol. 9(3), pages 405-432, July.
  18. Jiménez-Martín, Sergi & Labeaga, José M. & Martínez Granado, Maite, 1999. "Health status and retirement decisions for older European couples," IRISS Working Paper Series 1999-01, IRISS at CEPS/INSTEAD.
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Cited by:
  1. Ricky Kanabar, 2012. "Unretirement in England: An empirical perspective," Discussion Papers 12/31, Department of Economics, University of York.

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