Consumption, Retirement, and Social Security: Evaluating the Efficiency of Reform with a Life-Cycle Model

John Laitner and Dan Silverman
Additional contact information
John Laitner: University of Michigan

Working Papers from University of Michigan, Michigan Retirement Research Center

Abstract: This paper analyzes the effect of a potential reform to the Social Security system on individuals’ retirement and consumption choices. We first estimate the coefficients for a life-cycle model. We assume intratemporally nonseparable preference orderings and endogenous retirement. Our framework allows the possibility of disability. The specification predicts a change in consumption at retirement; we use the empirical magnitude of the change, together with desired retirement age, to identify key parameters such as the curvature of the utility function. We then qualitatively and quantitatively study the possible long-run effect of a Social Security reform in which individuals no longer face the OASI payroll tax after some specified age, and their subsequent earnings have no bearing on their Social Security benefits. Simulations indicate that retirement ages would rise by as much as one year, equivalent variations could average $5000 (1984 dollars) per household or more, and reform could generate $2500 or more additional income tax revenue per household.

New Economics Papers: this item is included in nep-age and nep-dge
Date: 2006-11
View list of references View citations in EconPapers

Downloads: (external link)
http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp142.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:mrr:papers:wp142

Access Statistics for this paper

More papers in Working Papers from University of Michigan, Michigan Retirement Research Center
Address: P.O. Box 1248, Ann Arbor, MI 48104
Contact information at EDIRC.
Series data maintained by MRRC Administrator ().