IDEAS home Printed from
   My bibliography  Save this paper

A Theory of Labor Supply Late in the Life Cycle: Social Security and Disability Insurance


  • Luisa Fuster

    (IMDEA Social Sciences Institute)

  • Gueorgui Kambourov

    (University of Toronto, NBER, and RCEA)

  • Andres Erosa

    (IMDEA Social Sciences Institute)


This paper studies the role of social security and tax and transfer programs for understanding cross-country differences in labor supply late in the life cycle. First, we use the Survey of Health, Ageing, and Retirement in Europe (SHARE) as well as the U.S. Health and Retirement Study (HRS) to document consistently the facts on labor supply late in the life cycle (over the age of 50). Second, we build a life-cycle, heterogeneous-agent model which incorporates important determinants of labor supply late in the life cycle. In particular, we model cross country differences in (i) the pay-as-you-go social security system - the benefit formula, accrual profile, early and normal retirement rules; (ii) income taxation; and (iii) the disability insurance rules. We use the model to assess how these institutions affect labor supply late in the life cycle as well as their relative importance in accounting for differences in labor supply among the European countries and between the United States and Europe. Third, we use our quantitative theory to conduct policy experiments that highlight the interaction between the various social programs in affecting labor supply decisions. Preliminary results indicate that the theory accounts well for the cross-country variation in labor supply documented in the data and that both features - social security and disability insurance - quantitatively play an important role.

Suggested Citation

  • Luisa Fuster & Gueorgui Kambourov & Andres Erosa, 2011. "A Theory of Labor Supply Late in the Life Cycle: Social Security and Disability Insurance," 2011 Meeting Papers 106, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:106

    Download full text from publisher

    File URL:
    Download Restriction: no


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

    Cited by:

    1. Hugo Benítez-Silva & Eva Cárceles-Poveda & Selçuk Eren, 2011. "Effects of Legal and Unauthorized Immigration on the U.S. Social Security System," Working Papers wp250, University of Michigan, Michigan Retirement Research Center.

    More about this item


    Access and download statistics


    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:sed011:106. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.