Working Paper: NBER ID: w8591
Authors: Joydeep Bhattacharya; Casey B. Mulligan; Robert R. Reed III
Abstract: A popular view about social security, dating back to its early days of inception, is that it is a means for young, unemployed workers to 'purchase' jobs from older, employed workers. The question we ask is: Can social security, by encouraging retirement and hence creating job vacancies for the young, improve the allocation of workers to jobs in the labor market? Using a standard model of labor market search, we establish that the equilibrium with no policy-induced retirement can be efficient. Even under worst-case parameterizations of our model, we find that public retirement programs pay the elderly substantially more than labor market search theory implies that their jobs are worth. An important effect, ignored by the popular view, is that the creation of a vacant job by a retirement reduces the value of other vacant jobs.
Keywords: No keywords provided
JEL Codes: H21; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social security policies (H55) | labor market efficiency (J48) |
| retirement (J26) | job vacancies (J63) |
| retirement incentives (J26) | job openings (J68) |
| job vacancy creation (J68) | value of other vacant jobs (J69) |
| social value of retirement > private value of retirement (J26) | optimal retirement policies (J26) |