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SOCIAL SCIENCE RESEARCH NETWORK
E M P L O Y E E B E N E F I T S , C O M P E N S A T I O N
& P E N S I O N L A W
Vol. 7, No. 31: October 27, 2006
Editors: PAMELA J. PERUN
Urban Institute
PAMELA@PLANETNOW.COM
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Topic of This Issue:
Social Security
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T A B L E O F C O N T E N T S
"Full Funding: The Future of Social Security"
BENJAMIN A. TEMPLIN
Thomas Jefferson School of Law
"Who Counts as an American Family?"
STEPHEN D. SUGARMAN
University of California, Berkeley - School of Law
(Boalt Hall)
"Myopia and the Effects of Social Security and Capital Taxation
on Labor Supply"
LOUIS KAPLOW
Harvard Law School, National Bureau of Economic Research
(NBER)
"Increasing Longevity and Social Security Reforms"
TORBEN M. ANDERSEN
University of Aarhus - Department of Economics, CESifo
(Center for Economic Studies and Ifo Institute for
Economic Research), Centre for Economic Policy Research
(CEPR), Institute for the Study of Labor (IZA)
"Labor Market Shocks and Retirement: Do Government Programs
Matter?"
COURTNEY COILE
Wellesley College - Department of Economics, National
Bureau of Economic Research (NBER)
PHILLIP B. LEVINE
Wellesley College, National Bureau of Economic Research
(NBER)
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"Full Funding: The Future of Social Security"
Contact: BENJAMIN A. TEMPLIN
Thomas Jefferson School of Law
Email: btemplin@tjsl.edu
Auth-Page: http://ssrn.com/author=348985
Full Text: http://ssrn.com/abstract=904404
ABSTRACT: Investing the Social Security Trust Fund in a well
diversified portfolio of stocks, bonds and other investments
remains the best hope of continuing to fund social insurance
without substantially raising taxes or reducing benefits. The
problem with investing the Trust Fund in the market is the
politically charged issue of government interference in the
investment decision and corporate governance. Three primary
solutions have emerged to the problems posed by government
investment: (1) personal accounts, (2) index investing, and (3)
the incorporation of the Trust Fund into a government-owned
private corporation as an investment vehicle for the trust fund.
I conduct a normative analysis of the ideological, political and
economic issues which surround government investment. I examine
each of the solutions in turn and conclude that the one which has
the most potential given current political realities is the third
alternative of creating a private corporation for the public
purpose of investing Social Security assets. I look at the
historical precedents for using private corporations to insulate
agencies from political influence and also identify the
constitutional and corporate government issues which would arise
as a result of the creation of such a corporation. I end with a
call for further study of the private corporate structure as an
investment vehicle for Social Security.
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"Who Counts as an American Family?"
UC Berkeley Public Law Research Paper No. 925247
Contact: STEPHEN D. SUGARMAN
University of California, Berkeley - School of Law
(Boalt Hall)
Email: sugarman@law.berkeley.edu
Auth-Page: http://ssrn.com/author=217556
Full Text: http://ssrn.com/abstract=925247
ABSTRACT: Public programs in America contain very different
conceptions of the "family." This essay explores these
differences in a variety of programs - social security, food
stamps, tax, immigration, welfare, and public housing.
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"Myopia and the Effects of Social Security and Capital Taxation
on Labor Supply"
Harvard Law and Economics Discussion Paper No. 555
Contact: LOUIS KAPLOW
Harvard Law School, National Bureau of Economic
Research (NBER)
Email: moverholt@law.harvard.edu
Auth-Page: http://ssrn.com/author=17111
Full Text: http://ssrn.com/abstract=926277
ABSTRACT: 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.
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"Increasing Longevity and Social Security Reforms"
CESifo Working Paper Series No. 1789
Contact: TORBEN M. ANDERSEN
University of Aarhus - Department of Economics,
CESifo (Center for Economic Studies and Ifo
Institute for Economic Research), Centre for
Economic Policy Research (CEPR), Institute for the
Study of Labor (IZA)
Email: tandersen@econ.au.dk
Auth-Page: http://ssrn.com/author=25372
Full Text: http://ssrn.com/abstract=932493
ABSTRACT: Increasing longevity causes an upward trend in the
dependency ratio in many countries. This raises concerns about
the financial sustainability of social security schemes, and
reform initiatives and proposals abound. It is shown that a
fundamental policy choice inevitably arises since a given social
security system cannot be maintained by simply indexing
retirement ages and benefits to longevity. The political reform
process is analysed using the so-called legislative procedure.
When longevity increases, the young generation contributes more,
and the old generation faces lower benefits and a retirement age
that increases more than proportionally to the increase in
longevity.
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"Labor Market Shocks and Retirement: Do Government Programs
Matter?"
NBER Working Paper No. W12559
Contact: COURTNEY COILE
Wellesley College - Department of Economics,
National Bureau of Economic Research (NBER)
Email: CCOILE@WELLESLEY.EDU
Auth-Page: http://ssrn.com/author=198588
Co-Author: PHILLIP B. LEVINE
Wellesley College, National Bureau of Economic
Research (NBER)
Email: PLEVINE@WELLESLEY.EDU
Auth-Page: http://ssrn.com/author=54111
Full Text: http://ssrn.com/abstract=934754
ABSTRACT: This paper examines how unemployment affects retirement
and whether the Unemployment Insurance (UI) system and Social
Security (SS) system affect how older workers respond to labor
market shocks. To do so, we use pooled cross-sectional data from
the March Current Population Survey (CPS) as well as March CPS
files matched between one year and the next and longitudinal data
from the Health and Retirement Survey (HRS). We find that
downturns in the labor market increase retirement transitions.
The magnitude of this effect is comparable to that associated
with moderate changes in financial incentives to retire and to
the threat of a health shock to which older workers are exposed.
Interestingly, retirements only increase in response to an
economic downturn once workers become SS-eligible, suggesting
that retirement benefits may help alleviate the income loss
associated with a weak labor market. We also estimate the impact
of UI generosity on retirement and find little consistent
evidence of an effect. This suggests that in some ways SS may
serve as a more effective form of unemployment insurance for
older workers than UI.