TY - JOUR
T1 - Consumption, retirement and social security
T2 - Evaluating the efficiency of reform that encourages longer careers
AU - Laitner, John
AU - Silverman, Dan
N1 - Funding Information:
Osamu Aruga and Lina Walker provided excellent research assistance with the CEX and HRS data sets, respectively. We thank the editor, Amy Finkelstein, two anonymous referees, David Blau, John Bound, Miles Kimball, Jeff Liebman, Richard Rogerson, Matthew Shapiro, and a number of seminar audiences for their many helpful comments. We are especially grateful to Erik Hurst for his exceptionally careful reading of this paper, detailed comments and productive suggestions. This work was supported by a grant from the Social Security Administration through the Michigan Retirement Research Center (Grant # 10-P-98358-5 ) and NIH/NIA grant R01-AG030841-01 . The opinions and conclusions are solely those of the authors and should not be considered as representing the opinions or policy of the Social Security Administration or any agency of the Federal Government or either the Retirement Research Consortium or MRRC.
PY - 2012/8
Y1 - 2012/8
N2 - This paper proposes and analyzes a Social Security reform in which individuals no longer face the OASI payroll tax after, say, age 54 or a career of 34 years, and their subsequent earnings have no bearing on their benefits. We first estimate parameters of a life-cycle model. Our specification includes non-separable preferences and possible disability. It predicts a consumption-expenditure change at retirement. We use the magnitude of the expenditure change, together with households' retirement-age decisions, to identify key structural parameters. The estimated magnitude of the change in consumption-expenditure depends importantly on the treatment of consumption by adult children of the household. Simulations indicate that the reform could increase retirement ages one year or more, equivalent variations could average more than $4000 per household, and income tax revenues per household could increase by more than $14,000.
AB - This paper proposes and analyzes a Social Security reform in which individuals no longer face the OASI payroll tax after, say, age 54 or a career of 34 years, and their subsequent earnings have no bearing on their benefits. We first estimate parameters of a life-cycle model. Our specification includes non-separable preferences and possible disability. It predicts a consumption-expenditure change at retirement. We use the magnitude of the expenditure change, together with households' retirement-age decisions, to identify key structural parameters. The estimated magnitude of the change in consumption-expenditure depends importantly on the treatment of consumption by adult children of the household. Simulations indicate that the reform could increase retirement ages one year or more, equivalent variations could average more than $4000 per household, and income tax revenues per household could increase by more than $14,000.
KW - Age-dependent taxation
KW - Life-cycle consumption and labor supply
KW - Social Security reform
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U2 - 10.1016/j.jpubeco.2012.02.005
DO - 10.1016/j.jpubeco.2012.02.005
M3 - Article
AN - SCOPUS:84860801743
SN - 0047-2727
VL - 96
SP - 615
EP - 634
JO - Journal of Public Economics
JF - Journal of Public Economics
IS - 7-8
ER -