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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
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    Cited by:

    1. 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.
    2. 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.
    3. Ricky Kanabar, 2012. "Unretirement in England: An empirical perspective," Discussion Papers 12/31, Department of Economics, University of York.

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