The destabilizing effects of the social norm to work under a social security system

Rodolphe Dos Santos Ferreira, Teresa Lloyd-Braga and Leonor Modesto

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Abstract: We study employment dynamics in an OLG model with unemployment benefits financed by taxing wages, and with a defined contribution plan. The novelty with respect to recent studies of the effects of social security in this context is that we introduce a social norm to work, shaping the worker's participation decision, and hence affecting the reservation wage. We find that a strong social norm to work destabilizes conventional wisdom by reversing the negative effects of social security on employment, and destabilizes the economy by facilitating the emergence of endogenous fluctuations.

Date: 2015-07
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Published in Mathematical Social Sciences, 2015, 76, pp.64-72. ⟨10.1016/j.mathsocsci.2015.04.004⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01738170

DOI: 10.1016/j.mathsocsci.2015.04.004

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