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Using longitudinal data for the period 1968-2005 for a sample of male household heads, we determine the prevalence of disability during the working years and examine how the extent of disability affects a range of outcomes, including earnings, income, and consumption. We have seven main findings. First, disability rates are high. We divide the disabled along two dimensions based on the persistence and severity of their work-limiting condition. We estimate that a person reaching age 56 has a 53 percent chance of having been disabled at least once during his working years, and a 19 percent chance that he has begun a chronic and severe disability. Second, the economic consequences of disability are frequently profound. Ten years after disability onset, a person with a chronic and severe disability on average experiences a 68 percent decline in earnings, a 32 percent decline in after-tax income, a 22 percent decline in food and housing consumption and a 21 percent decline in food consumption. Third, the various economic consequences differ sharply across disability groups. The outcome declines for those with a chronic and severe disability are often more than twice as large as those for the average disabled. Fourth, our findings show the partial and incomplete roles that individual savings, family support and social insurance play in reducing the consumption drop that follows disability. Only about half of this most disabled group reports receiving Social Security Disability Insurance or Supplemental Security Income. Fifth, we find a noticeable fall in earnings and income prior to the onset of a reported disability. Consumption also falls somewhat, suggesting that future disability is partially but incompletely predictable in the short run. Sixth, time use and detailed consumption data further indicate that disability is associated with a decline in well- being. Seventh, the quantities we have estimated, combined with elasticities from the literature, allow us to examine the optimality of current compensation for the disabled. We find that the current compensation for our most disabled group appears to be lower than is optimal.

Population aging and the burden it imposes on state finances is one of the major economic challenges governments around the world face. Responses are formulated in terms of either increasing employment (for example by raising the retirement age) or increasing productivity (investment in education). This paper brings together these two responses in a unified framework and shows how the individual’s education and retirement decisions are affected by population aging – caused either by a fall in the population growth rate, or an increase in life expectancy - and the budget balancing mechanism of the public pension systems. We discuss how a budget balancing mechanism can be informed by fairness considerations and we show that early retirement can be the result of the application of Musgrave’s rule in response to a fall in fertility.

L'adoption d'un système universel de retraite par points modifie le lien entre les revenus du travail et la pension de retraite. Dans cet article, nous proposons de mesurer l'impact possible d'un tel changement dans différents contextes de trajectoire salariale. Nous identifions sept cas-types suffisamment stylisés pour caractériser les principales propriétés du système actuel pour des salariés du secteur privé ayant eu des carrières complètes sous le plafond de sécurité sociale. Pour aborder la transition, nous étudions deux méthodes de valorisation des droits acquis dans l'ancien système. La première est la conversion immédiate des droits en points. La seconde consiste à faire cohabiter les règles de calcul (imbrication) et à attribuer une pension acquise avant réforme au prorata de la durée de cotisation dans l'ancien système. Nous identifions un scénario central de générosité constante à long terme pour une carrière donnée. Nous montrons qu'un impact différencié (et donc une redistribution) s'observe, indépendamment du niveau de revenu, au profit de la carrière peu dynamique et au détriment de la carrière plus dynamique. Pour des carrières comportant de mauvaises années cotisées, des baisses sensibles sont à craindre. Toutefois, pour les carrières avec de faibles salaires, une hausse de la pension minimum est en mesure de limiter l'impact de ces baisses voire au contraire conduire à une pension effectivement perçue plus élevée. La méthode de valorisation des droits acquis n'est pas neutre. La conversion est plutôt avantageuse pour des carrières peu dynamiques tandis que l'imbrication des règles est plus généreuse pour les carrières les plus dynamiques. The adoption of a universal point system modifies the link between labor income and pension benefits. In this paper, we propose to measure the possible impact of such a change when considering different wage trajectories. We identify seven stylized case studies to characterize the main properties of the current system for employees in the private sector with full careers under the social security ceiling. To address the transition issue, we setup two methods for valuing acquired pension rights in the old system. The first is the immediate conversion of the pension rights into points. The second consists in making the rules of calculation coexist and paying pension benefits acquired before the reform in proportion to the contribution period length in the old system. We contemplate a benchmarch scenario of constant long-run generosity for a given career. The impact is shown not to depend on the income level but on the salary profiles: a redistribution is carried out in favor of weakly growing profiles at the expense of the steeper ones. For careers with poor contribution years, significant declines are to be expected. However, for low-wage careers, an increase in the minimum pension is likely to limit the impact of these decreases or even to lead to a higher perceived effective pension. The way in which acquired pension rights are valued is not neutral. The conversion is rather advantageous for the least dynamic careers while the nesting of the rules is more generous for the most dynamic careers.

In the wake of the global pandemic known as COVID-19, retirees, along with those hoping to retire someday, have been shocked into a new awareness of the need for better risk management tools to handle longevity and aging. This paper offers an assessment of the status quo prior to the spread of the coronavirus, evaluates how retirement systems are faring in the wake of the shock. Next we examine insurance and financial market products that may render retirement systems more resilient for the world's aging population. Finally, potential roles for policymakers are evaluated.

We ask whether a pay-as-you-go financed social security system is welfare improving in an economy with idiosyncratic productivity and aggregate business cycle risk. We show analytically that the whole welfare benefit from joint insurance against both risks is greater than the sum of benefits from insurance against the isolated risk components. One reason is the convexity of the welfare gain in total risk. The other reason is a direct risk interaction which amplifies the utility losses from consumption risk. We proceed with a quantitative evaluation of social security’s welfare effects. We find that introducing an unconditional minimum pension leads to substantial welfare gains in expectation, even net of the welfare losses from crowding out. About 60% of the welfare gains would be missing when simply summing up the isolated benefits.

In order to study whether public pension systems displace private saving, we use the quasi-experimental variation in pension wealth created by Poland's 1999 pension reform. Using the 1997–2003 Polish Household Budget Surveys, we begin by estimating "difference-in-differences" regressions, where we compare household saving and expenditure across time and between cohorts affected and unaffected by the reform. Next, we estimate the extent of crowd-out by using two-stage least squares. We identify the effect of pension wealth on private saving by using the cohort-by-time variation in pension wealth that is explained by the reform. We find that one additional Polish zloty, or PLN, of pension wealth crowds out about 0.24 PLN in household saving. We also find heterogeneity in responses. For the middle-aged cohorts, we find a large public pension crowd-out of private saving (about 0.54 PLN of private saving for each 1 PLN of public pension wealth), while the crowd-out for younger cohorts equals about 0.30 PLN of private saving per 1 PLN. Finally, we find a close-to-complete crowd-out among highly-educated households.

This paper characterizes an intergenerational welfare state with endogenous education and pension choice under general equilibrium-probabilistic voting. We show that politically implementing public education program always increases the future human capital, but this higher future human capital would not help support a more generous social security in the future. The effect of implementing PAYG social security on education however crucially depends on the sources of funding for education investment. Establishing PAYG pension program depresses investment in public education. However if the source of funding for education investment is private, in both the cases when pension is the only instrument or when public pension and public education are implemented together as a package, there can be an improvement in education investment if and only if the political influence of the old is limited and so the size of the PAYG social security is small. A substantially thick pension scheme which results from a heavy influence of the old in the political process spoils the mutual benefits.

We examine the activity and performance of a large panel of individual investors (approximately 70,000 investors and their daily returns over the 2000 to 2010 period) in Sweden's Premium Pension System. We document strong inertia in individuals' choices and changes of mutual funds. We find that active investors outperform passive investors, and that there is a causal effect of fund changes on performance. The outperformance is primarily the result of dynamic fund selection. Activity is beneficial for the individual investor, whereas extreme flows out of mutual funds (which we attribute to financial advisors) affect funds' net asset value negatively for all investors.

We examine the effects of a novel political institution called Coalition Preclusion Contracts (CPCs) on the functioning of parliamentary democracies with proportional representation. CPCs enable political parties to credibly exclude one or several parties from the range of government coalitions they are prepared to envisage after elections. We consider a simple political game with a two-dimensional policy space in which three parties compete to form the government. We find that CPCs with a one-party exclusion rule defend the interests of the majority by precluding coalition governments that would include so-called extreme parties. This translates into moderation of the policies implemented and yields welfare gains for a large set of parameter values. We discuss the robustness of the results in more general settings and study how party-exclusion rules have to be adjusted when more than three parties compete in an election.

In this study, we investigate the wealth decumulation decision from the perspective of a retiree who is averse to the prospect of fully annuitizing her accumulated savings. We field a large online survey of hypothetical product choices for phased drawdown offerings and annuities. While the demand for annuities remains low in our sample, we find significant demand for phased withdrawal products with equity-based asset allocations and flexible payout structures. Consistent with the product choice, the most important self-reported considerations for the wealth decumulation decision are low default risk in the products they purchase, the size of the withdrawal rates, and flexibility in the timing of their withdrawal. As determinants of the decision of how much wealth individuals are willing to draw down, we identify consumers' attitudes towards future economic conditions, the extent to which they are protected against longevity risk, and their desire to leave bequests. Policy implications are discussed.

Many Americans claim Social Security benefits early, though this leaves them with lower benefits throughout retirement. We build a lifecycle model that closely tracks claiming patterns under current rules, and we use it to predict claiming delays if, by delaying benefits, people received a lump sum instead of an annuity. We predict that current early claimers would defer claiming by a year given actuarially fair lump sums, and the predictions conform with respondents' answers to a strategic survey about the lump sum. In other words, such a reform could provide an avenue for encouraging delayed retirement without benefit cuts or tax increases. Moreover, many people would still defer claiming even for smaller lump sums.

Prior literature has documented a positive association between income and cognitive function at older ages, however, the extent to which this association represents causal effects is unknown. In this study, we use an exogenous change in Social Security income due to amendments to the Social Security Act in the 1970s to identify the causal impact of Social Security income on cognitive function of elderly individuals. We find that higher benefits led to significant improvements in cognitive function and that these improvements in cognition were clinically meaningful. Our results suggest that interventions even at advanced ages can slow the rate of decline in cognitive function.

In this paper I study the impact of increasing longevity on pay-as-you-go pension systems. First, I show that increasing longevity increases the internal rate of return. The size of the effect differs for different policy regimes. It is higher for the case where the retirement age is increased to keep the system in balance than for the case where the necessary adjustment is achieved by reducing pension benefits. Second, I study optimally chosen retirement decisions and I show that the socially optimal policy involves a shorter working life than the private optimum. The social optimum can be implemented by the use of a PAYG system that combines an actuarial and a flat pension.

We explore the benefits of intergenerational risk-sharing through both private funded pensions and via the public debt. We use a multi-period overlapping generation model with a pay-as-you-go pension pillar, a funded pension pillar and a government. Shocks are smoothed via the public debt and variations in the indexation of pension entitlements and pension contributions. The intensity of these adjustments increases when the pension funding ratio or public debt gets closer to their boundaries. The best-performing pension arrangement is a hybrid funded scheme in which both contributions and entitlement indexation are simultaneously deployed as stabilisation instruments. We find that contribution and indexation adjustment policies are substitutes and the same is the case for contribution and tax adjustment policies. By contrast, indexation and tax adjustment policies are complements. We compare different taxation regimes and conclude that a regime in which pension benefits are taxed, while contributions are paid before taxes, is preferred to a regime in which contributions are paid after taxes, but benefits are untaxed.

Disability insurance (DI) applications and awards are countercyclical. One potential explanation is that unemployed individuals who exhaust their Unemployment Insurance (UI) benefits use DI as a form of extended benefits. We exploit the haphazard pattern of UI benefit extensions in the Great Recession to identify the effect of UI exhaustion on DI application, using both aggregate data at the state-month and state-week levels and microdata on unemployed individuals in the Current Population Survey. We find no indication that expiration of UI benefits causes DI applications. Our estimates are sufficiently precise to rule out effects of meaningful magnitude.

To evaluate pension reforms in public services, we put forward a simple criterion, the actuarial cost of a worker, per year of service. This measure of cost is the expected, discounted sum of net real wages and pension benefits, earned by a worker over his entire life cycle, divided by the number of years of service. We show the possibility of reforms such that (i), the actuarial cost of a worker per year of service is reduced, (ii) the utility of workers does not decrease and (iii) the pension fund deficits do not increase. Workers can willingly postpone retirement in exchange for increased final salaries and pensions. Present and future public subsidies may at the same time be reduced. We propose a quantitative analysis of the 2008 reform of the Paris Metro pensions. Focusing on the case of train drivers, we show that the reform should save public funds, but only in the long run. During a long transition period, the reform is likely to end up with larger State subsidies to the pension scheme. The reform can be interpreted as a deal between public authorities and insiders at the expense of recent recruits. A reform preserving the public budget from an outright increase in social costs could have been both technically feasible and politically acceptable.

The German government has recently adopted a reform package for the statutory pension insurance scheme to ensure that the pension level will not fall below 48% and that the contribution rate will not exceed 20% up to 2025. In addition, there are planned improvements in maternal pensions, pensions for people with reduced earnings capacity and relief for low-income earners. The total extra cost of these measures is estimated at approximately EUR 32bn, to be financed by funds of the statutory pension system and by increased federal subsidies. It is currently unclear how the German pay-as-you-go pension system will be reformed for the period after 2025. The author suggests establishing a "Pension Fund Germany" as a capital-backed fund with a highly diversified investment portfolio. A German sovereign wealth fund of this kind could make an important contribution to greater intergenerational equity. Financing could be provided by, for example, retaining part of the solidarity surcharge on German income tax rather than abolishing it entirely, as is currently envisaged.

Public sector employees receive large fractions of their lifetime income in the form of deferred compensation. The introduction of the opportunity provided to Illinois public school employees to purchase additional pension benefits allows me to estimate employees' willingness-to-pay for benefits relative to the cost of providing them. The results show employees are willing to pay 20 cents on average for a dollar increase in the present value of expected retirement benefits. The findings suggest substantial inefficiency in compensation and cast doubt on the ability of deferred compensation schemes to attract employees. (JEL H75, I21, J26, J45)

In this paper, we study the short-run effect of salary receipt on mortality among Swedish public sector employees. By using data on variation in paydays across work-places, we completely control for mortality patterns related to, for example, public holidays and other special days or events coinciding with paydays and for general within-month and within-week mortality patterns. We find a dramatic increase in mortality on the day salaries arrive. The increase is especially pronounced for younger workers and for deaths due to activity-related causes such as heart conditions and strokes. Additionally, the effect is entirely driven by an increase in mortality among low income individuals, who are more likely to experience liquidity constraints. All things considered, our results suggest that an increase in general economic activity on salary receipt is an important cause of the excess mortality.

We study the effects of pension reform in a four-period OLG model for an open economy where hours worked by three active generations, education of the young, the retirement decision of older workers, and aggregate growth, are all endogenous. Within each generation we distinguish individuals with high, medium or low ability to build human capital. This extension allows to investigate also the effects of pension reform on the income and welfare levels of different ability groups. Particular attention goes to the income at old-age and the welfare level of low-ability individuals. Our simulation results prefer an intelligent pay-as-you-go pension system above a fully-funded private system. When it comes to promoting employment, human capital, growth, and aggregate welfare, positive effects in a pay-as-you-go system are the strongest when it includes a tight link between individual labor income (and contributions) and the pension, and when it attaches a high weight to labor income earned as an older worker to compute the pension assessment base. Such a regime does, however, imply welfare losses for the current low-ability generations, and rising inequality in welfare. Complementing or replacing this ‘intelligent’ pay-as-you-go system by basic and/or minimum pension components is negative for aggregate welfare, employment and growth. Better is to maintain the tight link between individual labor income and the pension also for low-ability individuals, but to strongly raise their replacement rate.

Based on administrative panel data from Norway, we examine how social insurance dependency spreads within neighborhoods, families, ethnic minorities, and among former schoolmates. We use a fixed effects methodology that accounts for endogenous group formation, contextual interactions, and time-constant as well as time-varying confounders. We report evidence that social insurance dependency is contagious. The estimated network effects are both quantitatively and statistically significant, and they rise rapidly with "relational closeness" in a way that establishes endogenous social interaction as a central causal mechanism. Social interactions do not cross ethnic borders.

In diesem Beitrag identifizieren wir zum einen mit Hilfe von Daten der Deutschen Rentenversicherung (FDZ-RV) die Versicherten, die von der neuen „Rente mit 63“ profitieren. Zum anderen analysieren wir die Auswirkungen der „Rente mit 63“ auf die Finanzsituation der Gesetzlichen Rentenversicherung, insbesondere auf die mittel- und langfristige Entwicklung des Rentenniveaus und des Beitragssatzes. Unter der Annahme, dass die neue Vergünstigung auch voll in Anspruch genommen wird und dass es weder eine namhafte zusätzliche Inanspruchnahme der Arbeitslosenversicherung noch signifikante zusätzliche finanziellen Anreize durch die Arbeitgeber zum Weiterarbeiten geben wird, zeigen unsere Analysen, dass das Klischee vom „Arbeiter, der 45 Jahre lang malocht und dafür seine Gesundheit verschlissen hat“ keinesfalls korrekt ist. Diejenigen, die von der Reform profitieren, sind im Durchschnitt Versicherte mit höheren Rentenansprüchen. Diese eher besser Verdienenden haben im Schnitt zudem deutlich kürzere sozialversicherungspflichtige Erwerbszeiten aufzuweisen als 45 Jahre: für Männer liegt der Durchschnitt bei 38 Jahren, für Frauen bei 35 Jahren. Die von uns analysierten Daten liefern auch keine Evidenz dafür, dass Personen, die eine Wartezeit von 45 Jahren erfüllen, am Ende des Erwerbslebens häufiger krank sind. Das Gegenteil ist der Fall. Was die Auswirkungen auf die Gesetzliche Rentenversicherung angeht, zeigen unsere Simulationen, dass die „Rente mit 63“ zu einem höheren Beitragssatz und zu einem niedrigen Rentenniveau im Vergleich zu einer Situation ohne die Reform führt. Die Auswirkungen der „Rente mit 63“ auf den Beitragssatz werden durch die Fortschreibungsvorschriften des allgemeinen Bundeszuschusses gedämpft. Zur Finanzierung des höheren Bundeszuschusses müssen jedoch entweder die Steuern erhöht werden oder an anderer Stelle Einsparungen im Staatshaushalt erfolgen. Somit sind nicht nur die Versicherten in der Gesetzlichen Rentenversicherung, sondern alle Bürgerinnen und Bürger an der Finanzierung beteiligt. Diejenigen Rentner, die nicht von der Reform profitieren, bezahlen zudem langfristig mit geringeren Renten für die Reform.

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..

This paper provides empirical evidence of the existence of forward-looking asset-accumulation behavior among disability-insurance applicants, previously examined only in the theoretical literature. Using panel data from the RAND Health and Retirement Study, I show that rejected applicants for Social Security Disability Insurance (SSDI) possess significantly more assets than accepted applicants immediately prior to application and exhibit lower attachment to the labor force. These empirical results are consistent with the theoretical prediction in Diamond and Mirrlees (1978) and Golosov and Tsyvinski (2006) that certain individuals with high unwillingness to work maximize utility by planning in advance for their future disability insurance application. Because the existing empirical literature on disability insurance does not account for this intertemporal channel, it may underestimate the total work-disincentive effect of SSDI.

Despite the fact that the increasing involvement of the private sector in pension provision has brought more flexibility to the pay-out phase of retirement, little is known about the characteristics of those who choose to annuitize their pension wealth and those who do not. I combine unique micro-data from a large Swedish occupational pension plan with rich national administrative data to study the choice between life annuities and fixed-term payouts with a minimum payout length of 5 years for 183,000 retiring white-collar workers. I find that low accumulation of assets is strongly associated with the choice of the 5-year payout. Consistent with individuals selecting payout length based on private information about their mortality prospects, individuals who choose the 5-year payout are in worse health, exhibit higher ex-post mortality rates and have shorter-lived parents than annuitants. Individuals also seem to respond to large, tax-induced changes in annuity prices.

This paper examines how unemployment late in workers' careers affects the timing of their retirement. Using data from the Survey of Income and Program Participation from 1996 to 2011, we document that unemployed workers permanently leave the labor force at a significantly higher rate than employed workers. This effect is stronger once workers become eligible for social security benefits and it is significantly dampened by the eligibility for unemployment insurance benefits. Unemployed workers, particularly those workers in households with below median wealth, also have a significantly higher social security uptake rate shortly after turning 62 than employed workers. We find little evidence for housing or stock market effects on the timing of retirement.

Myopia is increasingly believed to be a significant determinant of behavior and also plays a central role in justifications for social security and policies toward the taxation of capital. It is important, however, to account for labor supply effects, particularly in light of the preexisting distortion due to labor income taxation. For example, might even actuarially fair social security have the highly distortionary effect of a tax on top of an existing tax (the income tax) because myopic individuals give excessive weight to present levies on earnings that finance distant future benefits? Similarly, might greater reliance on capital rather than labor income taxation be attractive because collections are in the future rather than when earnings are received? To answer these and other questions, this article analyzes the effect of such policies on labor supply in a model that explicitly incorporates myopic decision-making. Many of the results may seem counterintuitive. In most respects, even with myopia, social security has qualitatively different effects than those of a tax levied on top of an existing tax. Both social security and capital taxation may cause labor supply to rise or fall when individuals are myopic, depending on the curvature of individuals' utility as a function of consumption. Moreover, whatever is the sign of these effects under one assumption about how myopia relates to labor supply decisions, the sign is reversed under the other assumption that is considered. Additionally, some interventions have a first-order effect on labor supply from the outset but others do not, and some labor supply effects rise with the magnitude of the intervention whereas others fall.

Martin Stuart ("Marty") Feldstein, currently George F. Baker Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, Inc. (NBER), is an American economist who has made important contributions to public finance, macroeconomics, international economics, social insurance, health economics, the economics of national security, and many other fields of economics, trained a large number of prominent economists, served as President of the National Bureau of Economic Research for some thirty years, and served as President Ronald Reagan's chief economic advisor.

A major aim of the recent updates of National Accounting standards (SNA2008 and ESA2010) is to provide a more complete picture of households’ wealth. In this course it will become mandatory for European countries to publish annual estimates of unfunded public pension entitlements (UPPE) from 2017 onwards. This study describes the methodological concepts behind this new figure of national accounts. After a review of past studies we provide a large cross-country comparison for 18 EU countries and discuss a number of possible applications for policy makers and researchers. This includes the measurement of changes in pension obligations due to 2nd pillar pension reforms—observed recently in a number of Central and Eastern European countries. Also the use for estimating the offset between unfunded pension entitlements and savings rates (Feldstein in J Polit Econ 82:905–926, 1974) is discussed. Finally, we show the distribution of households’ wealth across Europe including financial wealth, dwellings and UPPE. With respect to the pre-financial crisis year 2006, our data indicate that taking these three wealth categories into account many differences between countries with Beveridgean and Bismarckian pension systems as well as between western and central eastern European countries are eliminated.

Is the current mix of tax preferences for employer-sponsored pensions and individual retirement saving in the U.S. delivering the best possible retirement-preparedness across and within generations? Using data from the triennial Survey of Consumer Finances for 1989 through 2013, cohort-based analysis of life-cycle trajectories shows that (1) overall retirement plan participation was relatively stable or even rising through 2007, though participation fell noticeably in the wake of the Great Recession and has remained lower, (2) participation is strongly correlated with income, and the shift in the type of pension coverage occurred within—not just across—income groups, (3) relative to previous cohorts and a counterfactual lifecycle benchmark, the recent decline in retirement plan participation and defined contribution (DC) retirement account balance-to-income ratios is concentrated among younger families and lower-income families.

A large share of the population in emerging market economies has no pension coverage, exposing them to the economic risks arising from socio-economic and individual shocks. This problem, which arises from having large informal (unregulated) sectors, affects not only poor workers, but as many as half the newly or nearly middle class in some emerging market economies. With very little social protection coverage today, these workers will also be vulnerable in the future unless tax, labor, and social policies change to encourage formalization. While formalization would require substantial resources in the short-term, it seems financially sustainable.

This article addresses a very topical issue that is the phenomena and factors influencing the risk of poverty for people aged over 65 years. Thus, for a time horizon of fifteen years that we consider representative, we determined the correlation of seven variables that influence the risk of poverty for a number of twenty-eight Member States of the European Union. We believe that in this way we can assess the impact of aging of the population on the pension systems and we will identify the necessary measures to support the sustainability and capability of the pension systems to provide future adequate replacement income.

The U.S. Social Security Disability Insurance (SSDI) program is designed to provide income support to workers who become unable to work because of a severe, long-lasting disability. At present, nearly nine million former workers receive SSDI benefits, following several decades of rapid growth. As the program has expanded, observers have debated the degree to which this program growth is due to, on the one hand, past policy changes and anticipated growth in the insured population, or on the other hand, declining returns to labor force participation among low-skilled workers. Underscoring the important role of labor markets is the evidence that SSDI payments in Appalachia responded counter-cyclically to local earnings shocks caused by the coal boom and bust of the 1970s and 1980s (Black, Daniel and Sanders, 2002). More recently, Linder and Burdick (2013) show that the unemployment rate was positively associated with disability benefit claiming during and after the 2001 recession. A finding that SSDI receipt is sensitive to economic cycles is of concern for several reasons. The first is that there is little evidence that the incidence of severe disability is itself countercyclical. Because of this, SSDI is designed to insure against permanent earnings shocks due to onset of disability, and not transitory earnings shocks due to labor market conditions. Its strict eligibility rules, lengthy application processing times, and implicit work disincentives reflect this purpose, and indeed very few SSDI beneficiaries ever return to substantial labor market activity. It is thus problematic if displaced and discouraged workers turn to the SSDI program when they are in need of temporary assistance, since they are unlikely to ever return to work once the labor market recovers. One explanation for these business cycle effects is that they are driven by conditional applicants; that is, workers with health impairments who would prefer to remain in the labor force, but who would apply for SSDI benefits if they lost their present job (Autor and Duggan, 2003). Because applying for public SSDI benefits in the United States requires that one’s earnings are below the threshold defining substantial gainful activity (SGA), the opportunity cost of applying for benefits is reduced when one becomes unemployed. Thus, not only should there be more SSDI applicants during economic downturns, there should be notable compositional differences between those who apply during economic expansions and those who apply during economic recessions. Using survey data, Coe and Rutledge (2013) find that SSDI applicants during recessions have higher past earnings and more recent work experience (see also Lindner and Burdick, 2013). In this study, we use administrative data to estimate the effect of labor market conditions, as measured by the unemployment rate, on the number of SSDI applications, the number and composition of initial allowances and denials, and the timing of applications relative to disability onset. We analyze the period of the Great Recession, and compare this period with business cycle effects over the past two decades, from 1992 through 2012. Our analysis isolates the quantity and composition of applicants who are induced to apply for SSDI benefits when labor market opportunities decline, and therefore provides important new evidence about the group for whom SSDI application is a substitute for labor force participation, and their impact on the SSDI program.

In this study, sustainability of social security policies in Turkey was analyzed by using 1989-2013 period annual data and 2007:M01-2014:M05 monthly data from by means of unit root test with multiple structural breaks of Carrion-i-Silvestre (2009) and cointegration test with multiple structural breaks of Maki (2012) and it was determined that there is a cointegration relationship between the series. Long-term cointegration coefficients were estimated by FMOLS and it was found that social security policies are sustainable in the weak form in Turkey. It was found that around 70% within 1989-2013 period and around 78% within 2007-2014 period of social security expenditures were met by income of social security institute. It was seen that sustainability of social security system has slightly improved in recent years.

Ez a tanulmány a Nyugdíj és Időskor Kerekasztal (NYIKA) keretében végzett közös kutatásunk eredményeinek összefoglalása, Augusztinovics Mária legutolsó munkáinak egyike. A NYIKA 2007 és 2009 közötti időszakban azt vizsgálta, hogy milyen változatokat tart lehetségesnek a működő nyugdíjrendszer elkerülhetetlen reformjának megvalósítására. Ezek között mi egy olyan rendszer kidolgozását javasoltuk, amelyben a társadalombiztosítási nyugdíj egy része alapnyugdíj, míg a másik rész egy szigorúan járulékfüggő nyugdíj lenne. Az alapnyugdíj bevezetése mindenekelőtt a végletes időskori szegénység elkerülését szolgálná, de egyúttal lehetővé tenné a munkát terhelő járulékok jelentős mértékű csökkentését is. A járulékfüggő nyugdíjat pontrendszerben terveztük, aminek célja a járulékok és a nyugdíjak közötti közvetlen kapcsolat megteremtése, valamint az automatikus indexálás megvalósítása. Emellett fontosnak tekintettük azt is, hogy egy ilyen rendszerben a biztosítottak minden életszakaszban felmérhetik, hogy mekkora az általuk már megszolgált várható nyugdíj mértéke. A számítási eredmények mutatják, hogy ez a rendszer megvalósítható és fenntartható lenne.* Journal of Economics Literature (JEL) kód: H55, J21, J26., The paper summarizes joint work in the framework of the Pension and Old Age Round-Table, one the most recent works done by Mária Augusztinovics. Between 2007 and 2009, the round-table investigated various potential variants for the inevitable reform of the current pension system. Of these, the authors proposed finalizing a public pension system in which part would be basic (flat) benefit and part strictly contributive. First, introduction of a basic pension would serve to ease old-age poverty while opening room for a significant reduction in earnings-based pension contributions. The contributive part would be based on a points system, creating a direct link between contributions and benefits and achieving automatic indexation. Furthermore, such a system would facilitate calculating expected benefits at each stage in life. Calculations show such a system is feasible and sustainable.

A well-known challenge for developers and users of dynamic microsimulation models is the question of credibility, the so-called black box problem. Several strategies have been proposed to validate models. They typically involve comparing the results of a simulation run to other suitable figures. This paper approaches the issue after a considerable time lag and uses empirical data for a retrospective comparison. The validation is concerned with the German AVID model, or more precisely, with the basic employment histories module of the model. The model uses survey data and process-generated data on app. 12 000 Germans to project future employment histories and future old age incomes. After seven years the original respondents were surveyed again so that it is possible to compare their simulated and empirical employment histories. Several aspects regarding desired properties of the simulation results and the characteristics of employment histories are discussed. They include global indicators like cross-sections on the aggregate level, cumulative values on the individual level, and structural indicators on the individual level. The results of the comparison are generally encouraging. On the aggregate and cumulative level there is a very good resemblance. Substantial deviations are only found on the individual, structural level: The empirical employment histories are much more continuous than the simulated ones. This overestimation of complexity can be explained by the developments in the time period used for the estimation of the model parameters, but it still leads to a general underestimation of social inequality in the simulation results.

A tanulmány empirikusan elemzi a nyugdíjkorhatár emelésének azonnali foglalkoztatási hatását. Az általános korhatár születési évjáratokhoz és nemekhez kötődő és egyik évről a másikra élesen változó 1997 és 2009 közötti emelkedése teszi lehetővé az oksági kapcsolat hiteles vizsgálatát a különbségek különbsége módszerével. Az eredmények azt mutatják, hogy az előrehozott nyugdíjkorhatár változása jelentős hatást gyakorolt a női foglalkoztatásra: az átlagosan 45 százalékos foglalkoztatási arány mintegy 5-7,4 százalékponttal emelkedett. A korbetöltött nyugdíjazás esetében ilyen hatás nem figyelhető meg. Ennek oka az, hogy a rokkantnyugdíjazás növekedése ellensúlyozta az öregségi nyugdíj igénybevételének csökkenését.* Journal of Economics Literature (JEL) kód: H31, H55, J14, J26., The paper provides empirical evidence of the effect of changing the retirement age on employment. Based on individual data from Hungary, where the retirement age rose in a number of stages between 1997 and 2009, the analysis benefits from substantial variation in pension eligibility over a relatively short time. It takes a difference/indifference approach and is supported by independent variation in the age-based eligibility rule that contributes to causal identification of the effect. Results suggest that the effect of the changes in early retirement age is substantial, amounting to a 5-7.4 percentage point increase in the 45 per cent employment rate of retirement-age women. Changes in the normal retirement age do not seem to have such an employment effect, because they are counteracted by increases in disability pension claims.

We offer an evaluation of the Social Security Administration demographic and financial forecasts used to assess the long-term solvency of the Social Security Trust Funds. This same forecasting methodology is also used in evaluating policy proposals put forward by Congress to modify the Social Security program. Ours is the first evaluation to compare the SSA forecasts with observed truth; for example, we compare forecasts made in the 1980s, 1990s, and 2000s with outcomes that are now available. We find that Social Security Administration forecasting errors—as evaluated by how accurate the forecasts turned out to be—were approximately unbiased until 2000 and then became systematically biased afterward, and increasingly so over time. Also, most of the forecasting errors since 2000 are in the same direction, consistently misleading users of the forecasts to conclude that the Social Security Trust Funds are in better financial shape than turns out to be the case. Finally, the Social Security Administration's informal uncertainty intervals appear to have become increasingly inaccurate since 2000. At present, the Office of the Chief Actuary, at the Social Security Administration, does not reveal in full how its forecasts are made. Every future Trustees Report, without exception, should include a routine evaluation of all prior forecasts, and a discussion of what forecasting mistakes were made, what was learned from the mistakes, and what actions might be taken to improve forecasts going forward. And the Social Security Administration and its Office of the Chief Actuary should follow best practices in academia and many other parts of government and make their forecasting procedures public and replicable, and should calculate and report calibrated uncertainty intervals for all forecasts.

The authors use a simple model to study the optimal design of unemployment insurance and employment protection. Workers are risk averse and face the possibility of unemployment. Firms are risk neutral and face random shocks to productivity. Workers can participate in a shadow economy, or informal sector. The model yields several lessons. First, countries should encourage formal employment to address the issue of informal employment. In extreme cases, such encouragement translates into high severance payments and negative payroll taxes. Along these same lines, unemployment payments cannot be too large. In fact, when the risk of informality is extreme, the authors find that unemployment benefits should be negative, which is (in effect) a positive tax on the lack of formal employment.

A central justification for social insurance and for other policies aimed at retirement savings is that individuals may fail to make adequate provision during their working years. Much research has focused on myopia and other behavioral limitations. Yet little attention has been devoted to how these infirmities, and government policies to rectify them, influence labor supply. This linkage could be extremely important in light of the large pre-existing distortion due to income and consumption taxation and income-based transfer programs. For example, might myopic individuals, as a first approximation, view payroll taxes and other withholding to fund retirement savings as akin to an income tax, while largely ignoring the distant future retirement benefits that they fund? If so, the distortion of labor supply may be many times higher than otherwise, making savings-promotion policies much more costly than appreciated. Or consider what may be the labor supply implications for an individual who is defaulted into higher savings and, as a consequence, sees concomitantly lower take-home pay. This essay offers a preliminary, conceptual exploration of these questions. In most of the cases considered, savings policies do not act purely like a tax despite individuals’ non-optimizing savings behavior, and in some cases labor supply actually is raised, not lowered, in which event policies that boost savings may be significantly more welfare-enhancing than recognized. Accordingly, there is a compelling need for empirical exploration of the interaction between nonoptimal savings behavior and labor supply.

In this article, I have analysed two components of our social protection system in our country: the expenses of social protection and the anticipated old age pension. The main goal of the study is the analysis of the correlation that exists between the expenses with social protection and the anticipated old age pension, while the secondary goal of the study consists of the identification of the way in which the pension increases to an increase of the expenses with social protection by one unit. In order to analyse this correlation, I will use a linear unifactorial regression model which consists of two variables, the expenses with social protection and the anticipated old age pension, and as duration, I will consider a period of ten years.

A fogyasztás finanszírozásának intézményi összetétele az életciklus két eltartotti szakaszában - gyermekkorban és időskorban - eltérő. Sarkosan fogalmazva: a gyermekeket a szüleik nevelik fel, az idősek pedig a társadalomra támaszkodnak. Tekintve, hogy az erőforrások háztartásokon belüli és háztartások közötti elosztását a nemzeti számlák nem rögzítik, a gyermekekre fordított erőforrások többsége nem látható, szemben az időseknek juttatott forrásokkal, amelyek viszont szinte teljes egészükben megjelennek a nyilvános statisztikákban. Elemzésünkben a nemzeti számlák egy új ágát, a nemzeti transzferszámlákat - amelyek felölelik a háztartásokon belüli és a háztartások közötti magántranszfereket -, továbbá ennek kísérleti jelleggel kiterjesztett változatát, a nemzeti időtranszferszámlát alkalmazzuk. Utóbbi a nem fizetett háztartási munkára szánt idő értékét számszerűsíti, és megbecsli annak mértékét, hogy az egyes korosztályokhoz tartozó családtagok milyen értékű munkát végeznek a más korosztályokhoz tartozó családtagok javára.* Journal of Economic Literature (JEL) kód: D13, E01, H55, H83, J13, J14., The authors argue for a difference in the institutional composition of funding consumption in the two dependent sections of the life cycle: childhood and old age. Children are raised by parents; the elderly rely on society. Since reallocations of resources within and between households are not registered in the national accounts, most of the resources transferred to children are not visible, whereas resources flowing to the elderly show almost completely in public statistics. The analysis applies a recent extension of the national accounts - National Transfer Accounts - which includes private transfers, and a further, experimental extension - National Time-Transfer Accounts - which quantifies the value of time transferred among household members as unpaid household labour. It appears that less than one-third of the full transfer package to children is registered in the national accounts and around another one-third is made visible by National Transfer Accounts. The remaining third, the value of parents caring for their children, is revealed by National Time Transfer Accounts. The corresponding shares in funding old age are different: 90 per cent appear in public statistics and the two accounting extensions reveal only a little less than 10 per cent. (The paper first appeared in the Journal of the Economics of Ageing.)

We study the short-, medium-, and long-run implications of stimulating annuity markets in a dynamic general-equilibrium overlapping-generations model. We find that beneficial partial-equilibrium effects of stimulating annuity markets are counteracted by negative general-equilibrium repercussions. Balancing the positive partial-equilibrium and negative general-equilibrium forces we show that there exists an intermediate level of annuitization such that the lifetime utility of steady-state agents is maximized. Studying the transition to this optimal degree of annuitization shows that currently middle-aged individuals stand to gain most from the stimulation of annuity markets. Complementing our main analysis, we highlight the centrality of the interplay between human-capital accumulation and annuity market policy.

Income transfers from social programs are often not gender neutral and should, according to the vast literature on intra-household decision making and allocation, affect the distribution of bargaining power within the household. This result, however, was by and large established under the assumption of marriage stability. If this assumption does not hold, then the positive response of bargaining power to income found in the empirical research may be the artefact of sample selection. One may postulate, however, that when restricted to certain groups in the population, such as seniors, the assumption may hold since their probability of divorce is close to zero. In this paper we prove that the assumption is wrong, even when applied to seniors. We use a non-contributory pension reform in Argentina, that resulted in an unexpected and substantial increase in permanent income for around 1.8 million women, to study its effects on outcomes related to both marital stability and women’s bargaining power within the household. We find that the reform increased the probability of divorce/separation among senior highly educated women but had no impact on the low-educated. Instead, the latter gained considerable bargaining power within the household by decreasing the probability of being the only one in charge of household chores in tandem with an increase in their husbands’ participation in these chores., Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS)

We study the impact of welfare payments in Ecuador on the probability that women and men work, and on whether they are employed in the formal or informal sectors. Our analysis is based on two distinct identification strategies and two separate sources of data spanning more than 10 years. We find no evidence that welfare discouraged work. However, among women, welfare payments led to reductions in social security contributions (which are mandated for salaried workers) and payment of VAT and income taxes (which are mandated for the self-employed and firm owners), although the magnitude of these effects is small.

The maximum amount of earnings in a calendar year that can be taxed by U.S. Social Security is currently set at $118,500. In this paper, I examine if removing this cap can solve Social Security's future budgetary problems. Using a calibrated general-equilibrium life-cycle consumption model, I show that under a realistic longevity improvement, removing this cap leads to Social Security benefits declining by less than 3%, compared to almost 15% when the cap is held fixed at its current level. Households for whom the cap expires respond by working and saving less, which reduces labor supply, capital stock, and output, and also reverses some of the initial expansion in Social Security's revenues. Elimination of the cap also makes Social Security more progressive, which has positive insurance effects for households with unfavorable earnings histories, but the higher marginal tax rates impose larger distortions on households that are no longer subject to the cap, which reduces overall welfare.

Social democracy and market liberalism provide different solutions to the same problem: how to provide for life‐cycle dependency. Social democracy makes lateral transfers from producers to dependents by means of progressive taxation. Market liberalism uses financial markets to transfer financial entitlement over time. Social democracy came up against the upper limits of public expenditure in the 1970s. The ‘market turn’ from social democracy to market liberalism was enabled by liberalized credit in the 1980s. Much of this was absorbed into homeownership, which attracted majorities of households (and voters) in the developed world. Early movers did well, but eventually easy credit drove house prices beyond the reach of younger cohorts. Debt service diminished effective demand, which instigated financial instability. Both social democracy and market liberalism are currently in crisis.