Social security and two-earner households

Remzi Kaygusuz

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In the past decades, elimination of the pay-as-you-go system in U.S. has been extensively discussed and studied. Such an elimination would also eliminate the intragenerational redistribution done by the following policies of social security. Due to spousal and survivor’s benefit provisions, Social Security system redistributes (mostly) to single-earner married households (not necessarily progressive). Retirement benefits are a concave function of past mean earnings. Hence, the system redistributes from high earners to low earners. Finally, existence of a cap on social security taxable earnings makes the system regressive. This is the first paper that quantifies redistributive, labor supply, and welfare implications of these policies using a general equilibrium life-cycle model. Agents start out as permanently married or single and with education levels and wage profiles, where the latter depend both on education and gender. The household is the decision maker and decides on labor supply of its member(s) and saving. The aggregate production function has as inputs capital and labor aggregated by efficiency. Elimination of these policies results in a 5.5%
rise in labor force participation of married females, while increasing aggregate welfare by 0.4%. A majority of households experience positive gains in welfare. Single-earner married households incur large welfare losses (as big as 1.1%), whereas two-earner households with high skilled spouses experience substantial welfare gains (as big as 1.9%).
Original languageEnglish
Pages (from-to)163-178
JournalJournal of Economic Dynamics and Control
Volume59
DOIs
Publication statusPublished - Oct 2015
Externally publishedYes

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Welfare
Personnel
Labor Supply
Elimination
Education
Wages
Security systems
Production Function
General Equilibrium
Concave function
Life cycle
Redistribution
Life Cycle
Quantify
Eliminate
Social security
Household
Policy
Experience
Labor supply

Keywords

  • Social Security
  • Two-earner households
  • Labor force participation

Cite this

Kaygusuz, Remzi. / Social security and two-earner households. In: Journal of Economic Dynamics and Control. 2015 ; Vol. 59. pp. 163-178.
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Social security and two-earner households. / Kaygusuz, Remzi.

In: Journal of Economic Dynamics and Control, Vol. 59, 10.2015, p. 163-178.

Research output: Contribution to journalArticleScientificpeer-review

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