Labor Market Search and Optimal Retirement Policy
A popular view about social security, dating back to its early days of inception, is that it is a means for young, unemployed workers to 'purchase' jobs from older, employed workers. The question we ask is: Can social security, by encouraging retirement and hence creating job vacancies for the young, improve the allocation of workers to jobs in the labor market? Using a standard model of labor market search, we establish that the equilibrium with no policy-induced retirement can be efficient. Even under worst-case parameterizations of our model, we find that public retirement programs pay the elderly substantially more than labor market search theory implies that their jobs are worth. An important effect, ignored by the popular view, is that the creation of a vacant job by a retirement reduces the value of other vacant jobs.
|Date of creation:||Nov 2001|
|Date of revision:|
|Publication status:||published as Joydeep Bhattacharya & Casey B. Mulligan & Robert R. Reed, 2004. "Labor Market Search and Optimal Retirement Policy," Economic Inquiry, Oxford University Press, vol. 42(4), pages 560-571, October.|
|Note:||AG EFG LS PE|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Casey B. Mulligan, 2000.
"Can Monopoly Unionism Explain Publicly Induced Retirement?,"
NBER Working Papers
7680, National Bureau of Economic Research, Inc.
- Casey B Mulligan, 2000. "Can Monopoly Unionism Explain Publically Induced Retirement?," University of Chicago - George G. Stigler Center for Study of Economy and State 157, Chicago - Center for Study of Economy and State.
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