 Differential mortality and the progressivity of social securityJournal of Public Economics, 2019, vol. 177, issue C, - Abstract: There is a well-established negative correlation between earnings and mortality risk. Using a calibrated general-equilibrium macroeconomic model, this paper examines how this correlation interacts with the welfare implications of Social Security's benefit-earnings rule. My primary findings suggest that the welfare ranking of alternative benefit-earnings rules is somewhat sensitive to differential mortality. Due to their relatively high mortality risk, households with unfavorable earnings histories heavily discount the expected utility from old-age consumption, and therefore do not put much weight on better work-retirement consumption smoothing. Because of this reason, Social Security's benefit-earnings rule warrants less redistribution in the presence of differential mortality, compared to when mortality risk is uncorrelated to earnings. I find that this result continues to hold when household-level labor supply distortions are ignored, and also when an alternative “maximin” welfare criterion is considered, but not when accidental bequests from the deceased are redistributed to the survivors. Keywords: Differential mortality; Social Security; Mortality risk; Labor income risk; Incomplete markets; Social insurance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:177:y:2019:i:c:3 DOI: 10.1016/j.jpubeco.2019.07.003 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
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