IDEAS home Printed from https://ideas.repec.org/p/red/sed011/935.html
   My bibliography  Save this paper

Social Security, Endogenous Retirement, and Intrahousehold Cooperation

Author

Listed:
  • 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.

Suggested Citation

  • Laura Turner & Giovanni Gallipoli, 2011. "Social Security, Endogenous Retirement, and Intrahousehold Cooperation," 2011 Meeting Papers 935, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:935
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2011/paper_935.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Richard Blundell & Ian Walker, 1986. "A Life-Cycle Consistent Empirical Model of Family Labour Supply Using Cross-Section Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(4), pages 539-558.
    2. Levine, David, 1983. "A remark on serial correlation in maximum likelihood," Journal of Econometrics, Elsevier, vol. 23(3), pages 337-342, December.
    3. Edward N. Wolff, 2007. "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze," Economics Working Paper Archive wp_502, Levy Economics Institute.
    4. Alan L. Gustman & Thomas L. Steinmeier, 2004. "Personal Accounts and Family Retirement," NBER Working Papers 10305, National Bureau of Economic Research, Inc.
    5. James H. Stock & David A. Wise, 1990. "The Pension Inducement to Retire: An Option Value Analysis," NBER Chapters, in: Issues in the Economics of Aging, pages 205-230, National Bureau of Economic Research, Inc.
    6. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695, Elsevier.
    7. Michael Baker & Gary Solon, 2003. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 267-288, April.
    8. David A. Wise, 1990. "Issues in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise90-1, March.
    9. David H. Autor & Mark G. Duggan, 2003. "The Rise in the Disability Rolls and the Decline in Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 157-206.
    10. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
    11. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
    12. Doreen Wing Han Au & Thomas F. Crossley & Martin Schellhorn, 2005. "The effect of health changes and long‐term health on the work activity of older Canadians," Health Economics, John Wiley & Sons, Ltd., vol. 14(10), pages 999-1018, October.
    13. Lundberg, Shelly & Pollak, Robert A, 1993. "Separate Spheres Bargaining and the Marriage Market," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 988-1010, December.
    14. Gustman, Alan L. & Steinmeier, Thomas L., 2005. "The social security early entitlement age in a structural model of retirement and wealth," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 441-463, February.
    15. Bound, John & Cullen, Julie Berry & Nichols, Austin & Schmidt, Lucie, 2004. "The welfare implications of increasing disability insurance benefit generosity," Journal of Public Economics, Elsevier, vol. 88(12), pages 2487-2514, December.
    16. Richard V. Burkhauser & J. S. Butler & Gulcin Gumus, 2004. "Dynamic programming model estimates of Social Security Disability Insurance application timing," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 671-685.
    17. Kevin E. Cahill & Michael D. Giandrea & Joseph F. Quinn, 2005. "Are Traditional Retirements a Thing of the Past? New Evidence on Retirement Patterns and Bridge Jobs," Boston College Working Papers in Economics 626, Boston College Department of Economics.
    18. Jiménez-Martín, Sergi & Labeaga, José M. & Martínez-Granado, Maite, 1999. "Health status and retirement decisison for older european couples," UC3M Working papers. Economics 6170, Universidad Carlos III de Madrid. Departamento de Economía.
    19. Ayşe İmrohoroğlu & Selahattin İmrohoroğlu & Douglas H. Joines, 2003. "Time-Inconsistent Preferences and Social Security," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 745-784.
    20. Kreider, Brent, 1999. "Social Security Disability Insurance: Applications, Awards, and Lifetime Income Flows," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 784-827, October.
    21. John Bound & Richard V Burkhauser & Austin Nichols, 2003. "Tracking The Household Income Of Ssdi And Ssi Applicants," Research in Labor Economics, in: Worker Well-Being and Public Policy, pages 113-158, Emerald Group Publishing Limited.
    22. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
    23. David H. Autor & Mark G. Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 71-96, Summer.
    24. Mark Aguiar & Erik Hurst, 2007. "Measuring Trends in Leisure: The Allocation of Time Over Five Decades," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(3), pages 969-1006.
    25. Shintaro Yamaguchi & Claudia Ruiz & Maurizio Mazzocco, 2014. "Labor Supply, Wealth Dynamics and Marriage Decisions," 2014 Meeting Papers 210, Society for Economic Dynamics.
    26. Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February.
    27. Campolieti, Michele, 2002. "Disability and the labor force participation of older men in Canada," Labour Economics, Elsevier, vol. 9(3), pages 405-432, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ricky Kanabar, 2012. "Unretirement in England: An empirical perspective," Discussion Papers 12/31, Department of Economics, University of York.
    2. Blau, David M. & Goodstein, Ryan M., 2016. "Commitment in the household: Evidence from the effect of inheritances on the labor supply of older married couples," Labour Economics, Elsevier, vol. 42(C), pages 123-137.
    3. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    4. Joubert,Clement Jean Edouard, 2020. "Gender Pension Gaps in a Private Retirement Accounts System : A Dynamic Model of Household Labor Supply and Savings," Policy Research Working Paper Series 9322, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giovanni Gallipoli & Laura Turner, 2009. "Household Responses to Individual Shocks: Disability and Labor Supply," Working Paper series 04_09, Rimini Centre for Economic Analysis.
    2. Gallipoli, Giovanni & Turner, Laura, 2009. "Household Responses to Individual Shocks: Disability and Labour Supply," CLSSRN working papers clsrn_admin-2009-32, Vancouver School of Economics, revised 22 Jun 2009.
    3. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics.
    4. Bruce Meyer & Wallace K. C. Mok, 2016. "Disability, Earnings, Income and Consumption," NBER Chapters, in: Social Insurance Programs (Trans-Atlantic Public Economics Seminar, TAPES), National Bureau of Economic Research, Inc.
    5. Mark Duggan & Perry Singleton & Jae Song, 2005. "Aching to Retire? The Rise in the Full Retirement Age and its Impact on the Disability Rolls," NBER Working Papers 11811, National Bureau of Economic Research, Inc.
    6. Duggan, Mark & Singleton, Perry & Song, Jae, 2007. "Aching to retire? The rise in the full retirement age and its impact on the social security disability rolls," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1327-1350, August.
    7. Hjellset Alne, Ragnar, 2018. "Economic incentives, disability insurance and labor supply," Working Papers in Economics 2/18, University of Bergen, Department of Economics, revised 14 Jun 2018.
    8. Alberto Alesina & Andrea Ichino & Loukas Karabarbounis, 2011. "Gender-Based Taxation and the Division of Family Chores," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 1-40, May.
    9. Mari Rege & Kjetil Telle & Mark Votruba, 2012. "Social Interaction Effects in Disability Pension Participation: Evidence from Plant Downsizing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1208-1239, December.
    10. Marion Goussé & Nicolas Jacquemet & Jean-Marc Robin, 2016. "Marriage, Labor Supply, and Home Production: A Longitudinal Microeconomic Analysis of Marriage, Intra-Household Bargaining and Time Use Using the BHPS, 1991-2008," Cahiers de recherche 1601, CIRPEE.
    11. Doepke, M. & Tertilt, M., 2016. "Families in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1789-1891, Elsevier.
    12. Marion Goussé & Nicolas Jacquemet & Jean‐Marc Robin, 2017. "Marriage, Labor Supply, and Home Production," Econometrica, Econometric Society, vol. 85(6), pages 1873-1919, November.
    13. J. Gimenez-Nadal & Jose Molina, 2013. "Parents’ education as a determinant of educational childcare time," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 719-749, April.
    14. repec:hal:spmain:info:hdl:2441/5qto0mb54p8u69nt9krvc2btjm is not listed on IDEAS
    15. Robert M. Solow & Jean-Philippe Touffut (ed.), 2010. "The Shape of the Division of Labour," Books, Edward Elgar Publishing, number 14184.
    16. Owen O'Donnell & Eddy Van Doorslaer & Tom Van Ourti, 2013. "Health and Inequality," Tinbergen Institute Discussion Papers 13-170/V, Tinbergen Institute.
    17. Rachel Connelly & Jean Kimmel, 2009. "Spousal influences on parents’ non-market time choices," Review of Economics of the Household, Springer, vol. 7(4), pages 361-394, December.
    18. Andreas Ravndal Kostol & Magne Mogstad, 2014. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," American Economic Review, American Economic Association, vol. 104(2), pages 624-655, February.
    19. Mullen, Kathleen J. & Staubli, Stefan, 2016. "Disability benefit generosity and labor force withdrawal," Journal of Public Economics, Elsevier, vol. 143(C), pages 49-63.
    20. Pierre-André Chiappori & Costas Meghir, 2014. "Intrahousehold Inequality," NBER Working Papers 20191, National Bureau of Economic Research, Inc.
    21. Lee, Siha, 2020. "Household responses to disability shocks: Spousal labor supply, caregiving, and disability insurance," CLEF Working Paper Series 21, Canadian Labour Economics Forum (CLEF), University of Waterloo.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed011:935. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.