Labor Supply Elasticity and Social Security Reform

Selahattin Imrohoroglu and Sagiri Kitao

Working Papers, Center for Retirement Research at Boston College from Center for Retirement Research

Abstract: Previous literature on social security reform has used a variety of period utility functions and calibrated values for the intertemporal elasticity of substitution (IES) in labor. In this paper, we extensively study various preferences and values for IES in a general equilibrium model with overlapping generations. We calibrate the model to key U.S. macroeconomic indicators and document how social security reform impacts the economy under different preferences. We find that aggregate effects are surprisingly similar, regardless of the wide range of the values of IES used. However, reform leads to a life-cycle reallocation of work hours from early years to later working years and the size of this reallocation significantly increases with the IES.

Pages: 28 pages
Date: 2009-01, Revised 2009-03
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Citations: View citations in EconPapers (89)

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Journal Article: Labor supply elasticity and social security reform (2009)
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