Social Security, Benefit Claiming, and Labor Force Participation: A Quantitative General Equilibrium Approach
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.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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