Labor Supply and the Optimality of Social Security
Shantanu Bagchi ()
No 2014-04, Working Papers from Towson University, Department of Economics
Traditional economic theory predicts that unfunded social security can be justified on the basis of its ability to efficiently finance retirement, and also for its ability to provide insurance against mortality risk and uninsurable shocks to labor income. In this paper, I demonstrate that the quantitative importance of the traditional roles of social security depends on how household labor supply responds to social security. I build a calibrated general-equilibrium model where social security has a large welfare-improving role, and I show that the distortionary effect on households' labor hours erases virtually all the welfare gains from social security. I also find that this result is robust within the range of labor supply elasticities usually encountered in the macroeconomic literature..
Keywords: Labor supply; Social security; Mortality risk; Productivity shock; Insurance; Elasticity. (search for similar items in EconPapers)
JEL-codes: E21 H55 J22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dge, nep-ger, nep-ias and nep-mac
Date: 2014-09, Revised 2014-09
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://webapps.towson.edu/cbe/economics/workingpapers/2014-04.pdf First version, 2014 (application/pdf)
Journal Article: Labor supply and the optimality of Social Security (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tow:wpaper:2014-04
Access Statistics for this paper
More papers in Working Papers from Towson University, Department of Economics Contact information at EDIRC.
Series data maintained by Juergen Jung ().