New papers from the Social Science Research Network

SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"Social Security, Benefit Claiming and Labor Force Participation: A Quantitative General Equilibrium Approach" 

CRR (Boston College Center for Retirement Research) WP 2010‐2

SELAHATTIN IMROHOROGLU, University of Southern California - Department of Finance and Business Economics
Email: selo@marshall.usc.edu
SAGIRI KITAO, Federal Reserve Banks - Federal Reserve Bank of New York
Email: sagiri.kitao@gmail.com

We build a general equilibrium model with endogenous saving, labor force participation, work hours and Social Security benefit claiming, in which overlapping generations of individuals face income, survival, and health expenditure risks in incomplete markets. We use the model to study the impact of three Social Security reforms: reductions in benefits and payroll taxes, an increase in the early retirement age from 62 to 64, and an increase in the normal retirement age from 66 to 68. We show that a reform can have a significant effect on the budget of Social Security through changes in savings as well as benefit claiming and labor force participation. When the projected aging of the population is taken into account, the case for a reform that encourages labor force participation of the elderly becomes stronger.

"Back to the Drawing Board: The Economic Crisis and Its Implications for Pension Provision in the United Kingdom" 

DR. AMARENDRA SWARUP, Pension Corporation
Email: swarup@pensioncorporation.com
FRANK EICH, Pension Corporation
Email: eich@pensioncorporation.com

This paper focuses on an issue, which so far has received relatively little attention by policy makers and the media, namely that the economic crisis has highlighted inherent weaknesses in existing pension systems in many countries.

Using the example of the UK, the paper argues that the economic crisis will usher in further changes to the future provision of pensions, with the role of the private and public sectors likely to evolve in the years ahead. To support this argument, the paper first presents the pension landscape in the UK prior to the crisis, which was dominated by the closure of defined benefit pension schemes in the private sector and the government's reform efforts. The paper then describes the impact of the economic crisis from both a macroeconomic and financial perspective on all aspects of the pension system, from the government's deteriorating public finances to the collapsing funding position of occupational defined-benefit and defined-contribution schemes. The paper concludes by suggesting that the crisis has left the British pension system in a weakened state and that it is unlikely that it will return to its "pre-crisis" status once the economy recovers from the crisis.

"Getting to the Top of Mind: How Reminders Increase Saving" 

DEAN S. KARLAN, Yale University - Economic Growth Center, Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab, Center for Global Development
Email: dean.karlan@yale.edu
MARGARET MCCONNELL, Harvard University
Email: mmcconne@hsph.harvard.edu
SENDHIL MULLAINATHAN, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)
Email: mullain@fas.harvard.edu
JONATHAN ZINMAN, Dartmouth College, Innovations for Poverty Action; Jameel Poverty Action Lab
Email: jzinman@dartmouth.edu

We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with other models of present-bias. Our model also generates the unique predictions that reminders will increase saving, and that a reminder that makes a specific expenditure more salient will be especially effective. We find support for these predictions in three field experiments that randomly assign reminders to new savings account holders.