delays in claiming social security benefits this paper focuses on social security benefit claiming behavior a takeup decision that has been ignored in the previous literature using financial calculations and simulations based on an expected utility maximization model we show that delaying benefit claim for a period of time after retirement is optimal in a wide variety of cases and that gains from delay may be significant we find that approximately 10 of men retiring before their 62nd birthday delay claiming for at least one year after eligibility we estimate hazard and probit models using data from the new beneficiary data system to test four cross sectional predictions while the data suggest that too few men delay we find that the pattern of delays by early retirees is generally consistent with the hypotheses generated by our theoretical model

multiproduct short run hospital cost functions empirical evidence and policy implications from cross section data economists and policymakers have been interested in hospital costs and the structure of hospital technologies for several decades now early interest was focused on the possibility of scale economies which implied increased efficiency for larger hospitals 6 8 12 13 18 20 while more recent interest has been stimulated by the inflationary spiral of hospital costs 1 15 17 22 as hospital costs have risen important policy questions concerning the impact on costs of the hospitals diagnostic case mix the hospitals admitting physicians the hospitals size and the hospitals efficiency have emerged and researchers have attempted to deal with these issues within the context of increasingly complex econometric models 1 2 5 24 27 however in attempting to analyze these important policy issues researchers have been forced to make two major types of compromises on the one hand appropriate data are often not available for estimating a well specified cost function e g information on admitting physicians and diagnostic case mix are often missing so that problems of specification error often plague the econometric results conversely in using imaginative ways to deal with data problems e g weighting in patient and out patient care to form a single index of hospital services 1 27 or estimating separate cost functions for each department in the hospital 2 researchers sometimes place unrealistic and unnecessary constraints on their econometric models the purpose of this study is to analyze the impact of several of the primary hospital characteristics mentioned above on the short run costs of hospitals within a theoretically consistent framework in the following discussion we also develop the theoretical

costs and factor substitution in the provision of local fire services evidence on costs and factor substitution is presented for a sample of local fire departments in new york state the results suggest that fire service production does not fit either leontief cobb douglas or ces technology in addition exogenous socioeconomic variables are found to significantly affect public sector costs and the estimates of factor price elasticities the findings of relatively low factor demand and substitution elasticities suggest that local governments may have limited flexibility in adjusting their production of fire services to minimize the impact of rising factor prices copyright 1992 by mit press

the link between pensions and retirement timing lessons from california teachers abstract i exploit a major unanticipated reform of the california teachers pension to provide quasi experimental evidence on the link between pension features and retirement timing using two large administrative data sets i conduct a reduced form analysis that leverages the nonlinearities in the return to work generated by the pension features and the reform induced shifts of these nonlinearities for identification the implied estimates of the elasticity of lifetime labor supply with respect to the return to work are centered around 0 04 in the medium run and are less than 0 1 in the long run

contractual responses to the common pool prorationing of crude oil production this paper examines bargaining among firms to mitigate rent dissipation following the major oil discoveries of 1926 35 because of high bargaining costs firms chose prorationing instead of consolidation and unitization and success varied the analysis also shows that prorationing took the form it did because concession such as per well quotas were required to draw in small operations and the quotas led to predictable responses regarding rent dissipation prorationing despite its costs controlled total field production and costs conserved natural reservoir energies and lengthened field life when private agreements failed the parties successfully appealed for state enforcement since similar heterogeneities influnce regulations elsewhere in the economy detailed analysis of bargaining among firms is essential for insight into the emergence of various institutional forms 33 references 3 tables

social security unanticipated benefit increases and the timing of retirement between 1969 and 1972 real u s social security retirement benefits rose by 20 the rise was unanticipated and followed over 15 years of relatively constant real benefits this paper proposes a model of retirement behaviour in which workers respond differently although in a theoretically consistent manner to the anticipated and unanticipated components of the social security benefit they can receive upon retirement the retirement age decision in the presence of unanticipated benefit changes is shown to be a special case of utility maximization under a nonlinear budget constraint the model is estimated using the longitudinal retirement history survey between 1969 and 1973 real social security benefits for u s workers with fixed earnings histories were raised by more than 20 these increases were the first significant increases in social security since the early 1950 s at the same time that retirement benefits were rising the trend toward early retirement among older american men accelerated in the period from 1965 to 1970 the labour force participation rate of men aged 55 to 64 fell 1 6 percentage points from 84x6 to 83 0 but in the five years after 1970 the rate fell an additional 7 4 points to 75 6 the participation rate of men over 65 fell by 1 1 points in the five years after 1965 but by 5 2 points during the mid 1970 s 1 not surprisingly a large share of this labour force decline has been attributed to the effects of the social security increases enacted in 1969 and 1972 the purpose of this paper is to determine the precise effect of the unanticipated benefit increases on the timing of retirement the effect of social security on the age at retirement has been the subject of lively debate in recent years the literature has been reviewed in two recent papers by mitchell and fields 1982 and hurd 1983 who reach nearly opposite conclusions about the lessons that can be drawn from past empirical research mitchell and fields find that no definite judgment can be reached about the effects of social security on retirement while hurd argues that more careful studies have all found a significant and meaningful effect of social security on early retirement certainly the earlier studies by boskin 1977 and boskin and hurd 1978 found very large social security effects with boskin concluding that the social security system has been the major factor in the explosion in earlier retirement boskin 1977 p 1 very recent studies by burkhauser and quinn 1983 burtless and moffitt 1984 diamond and hausman 1984 fields and mitchell 1984 and hausman and wise 1985 have found smaller social security effects however none of them dealt explicitly with the rapid rise in real benefits during the early 1970 s the approach taken in this paper differs significantly from that in the earlier research just cited the proposed econometric model takes full account of the nonlinear relationship between goods consumption and the age at retirement introduced by social security

race and human capital while human capital has been used with some success to analyze recent changes in racial income differences scholars have repeatedly pointed to a major empirical problem that appears to severely limit the historical relevanlce and scope of skill based theories as applied to racial questions the challenge they raise is legitimate put simply if measured skill disparities between the races narrowed throughout the twentieth century why did income ratios first begin to converge in the 1960 s in this paper i address this question relying on some unexploited census data by race on education literacy occupations and income using these data that begin with the 1890 census i present new estimates of agespecific relative income positions of black men for all postslavery birth cohorts in addition to reconciling the apparently inconsistent skill and income series these income ratios offer a very different historical record than many economists believe to have been the case to cite a prominent example gunnar myrdal s classic work 1944 saw the economic position of his contemporary black america not only as dismal but made even more so by its sense of hopelessness given the absence of any hint of progress or change while myrdal s pessimism is understandable it appears that even in his day seeds had long been sown that were already permanently altering and improving the relative economic status of black men

the effect of pension design on employer costs and employee retirement choices evidence from oregon abstract we use administrative data from oregon s public employees retirement system pers to study the effect of pension design on employer costs and employee retirement timing decisions during our 1990 2003 sample period pers calculates each member s retirement benefit using up to three different formulas defined benefit db defined contribution dc and a combination of db and dc and pers pays the maximum benefit for which the member is eligible we show that this maximum benefit calculation results in average ex post retirement benefits that are 54 higher than if they had been calculated using only the db formula and that employees receiving dc benefits are significantly more likely than employees receiving db benefits to retire before the plan s normal retirement age monte carlo simulations verify that the higher costs could have been predicted at the start of our sample period exploiting exogenous plan changes we show that employees respond to within year variation in their retirement incentives and consistent with peer effects that they respond more strongly to these incentives when more of their coworkers face similar incentives finally consistent with the emerging literature on financial mistakes by households we show that a small but noteworthy fraction of retirees would have benefited from shifting their retirements by as little as one month

disentangling retirement and savings responses in january 2006 the dutch government implemented a pension reform that substantially reduced the public pension wealth of workers born in 1950 or later at the same time a tax facilitated savings plan was introduced that implied a large savings subsidy for all workers irrespective of birth year this paper uses linked administrative and survey data to assess the effect of the reform on the savings and retirement expectations and realizations of two virtually identical male cohorts that differ only in treatment status the treated having been born in 1950 and the controls having been born in 1949 we show that retirement expectations are in line with realizations and that the reform increased the labor supply for the larger part of the workers namely those without sufficient means to substantially increase private savings to counter the effect of the reform these workers have zero substitution rates between private and public wealth on the other hand there is a group of mostly high wage workers who participate in the tax facilitated savings plan and increase their private savings to fully counter the impact of the drop in public wealth an unintended side effect of the introduction of the tax facilitated savings plan is that high wage earners who are not affected by the drop in pension wealth retire even sooner than initially planned

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

the efficiency of the spanish police service an application of the multiactivity dea model in this paper the efficiency of the spanish police service is analysed using data envelopment analysis dea the analysis concentrates on the police activities related to the solving of crimes the theoretical and empirical study of the police production function under this dimension leads to a consideration of the units analysed as centres which carry out their activities with nonidentical technologies and using common inputs accordingly the multiactivity dea model developed by mar molinero journal of the operational research society 47 1996 1273 9 is applied one that is designed to estimate the efficiency of institutions which face several production functions using shared inputs the results demonstrate the important differences that exist between the centres with respect to the distinct activities analysed both as regards the efficiency rates and the factors which determine them

does outlawing mandatory retirement reduce public pension benefit claim exploiting the 2011 abolishment of the mandatory retirement provision that had allowed employers to force retirement of their 65 or older employees in the uk this paper estimates the effect of out

new evidence on pensions social security and the timing of retirement using a unique dataset that links the economic and demographic information of households with the details of their pension formulas i estimate the combined effect of social security and pension benefits on the probability of retirement in a cross section of the population near retirement age the accrual rate of retirement wealth is shown to be a significant determinant of the probability of retirement simulations of extensions in pension coverage comparable to those that occurred in the early postwar period can account for one fourth of the contemporaneous decline in labor force participation rates 1998 elsevier science s a all rights reserved

economies of scale and economies of scope in multiproduct financial institutions a study of british columbia credit unions this paper investigates the production technology facing computerized credit unions in canada a full system of translog cost equations is estimated in order to test for economies of scale economies of scope and other production characteristics in a multiproduct context the regression results indicate that most of the credit unions in our sample experience significant increasing returns to scale as they expand their level of output there is also evidence of cost complementarity or economies of scope in their mortgage and other lending activities as a result legislation which limits the ability of credit unions to grow and diversify will likely raise the operating costs of this important group of financial institutions additional structural tests of the most general translog specification suggest that none of the restrictive production conditions commonly imposed by other researchers using cobb douglas and ces specifications provide a valid representation of credit union technology the results of many earlier studies are therefore open to question this paper presents a number of structural tests of the production technology facing large computerized credit unions in canada a full system of translog cost equations is estimated using detailed cross sectional data on british columbia credit unions the parameter estimates obtained from our multiproduct specification allow us to test for economies of scale economies of scope and factor substitution unlike many earlier studies the present paper introduces the various outputs as separate variables instead of crudely proxying them with a single output measure such as total assets the total number of loans or the number of depositors by explicitly recognizing the multiproduct nature of the intermediation process we are able to address more interesting production questions and remove some of the bias caused by misspecification and measurement error in simpler approaches the flexible translog specification allows us to estimate the sensitivity of costs to proportionate increases in all outputs economies of scale as well as the cost savings firms realize by producing several outputs jointly rather than specializing in the production of one economies of scope the test results reported in the latter part of the paper suggest that increasing returns to scale exist in almost all of the credit unions in our sample though

health longevity and retirement reform abstract in this paper we study alternative retirement reforms designed to achieve fiscal sustainability in the face of demographic change we are particularly interested in the heterogeneous effects across demographic groups as improvements in health and longevity have not been uniform across the population to this end we develop a dynamic structural life cycle model of heterogeneous agents who face health mortality and income risk we consider the following policy reform measures 1 increasing the early access age to old age retirement 2 raising income taxes 3 lowering old age retirement benefits and 4 lowering old age retirement and disability benefits we find that of the considered policies proportionally lowering old age retirement and disability benefits results in the highest average welfare for all education categories it is also the most successful at boosting employment

housing wealth property taxes and labor supply among the elderly we investigate the relationship between housing wealth property taxes and elderly labor supply using longitudinal data from the health and retirement survey spanning the recent boom bust housing cycle when combined with msa specific house price indexes the data provide plausibly exogenous variation in housing wealth identified through within msa renter homeowner comparisons our findings suggest that elderly households respond to variation in housing wealth and property taxes in the predicted opposing directions that wealth influences labor supply to a lesser extent than factors like health and marital status and that the effect of housing wealth on labor supply varies by gender and age

production cost structure of us hospital pharmacies time series cross sectional bed size evidence there are current concerns about potential factor substitutions and their implications for factor employments and cost containment in us hospital pharmacies a translog production cost model is estimated for these pharmacies using 1981 9 times series data consisting of seven cross sectional bed size classes per year zellner s joint gls estimation of three factor cost share equations and the parent translog cost function reveals that pairwise factor substitutions are severely limited production is non homothetic occurring in the range of scale diseconomies biased and pure technical change effects dominate the scale augmenting component implications of findings are rationalized in the context of the emerging biopharmaceutical technologies

quasi experimental analysis on the effects of adoption of a value added tax i introduction the value added tax vat has displaced many different trade sales and manufacturing taxes in the past half century becoming a major source of government revenue for an increasing number of countries the tax has all the desirable non distortionary theoretical properties of a sales tax its incidence ultimately falling on consumers but it is much harder to avoid as the tax is collected at all intermediate steps during the production of a finished retail good rather than at the final sale as a result it has proven incredibly popular as it can collect a great deal of revenue keen and lockwood 2010 toder and rosenberg 2010 while this tax is theoretically less distorting than other taxes for each dollar of revenue collected there is limited analysis regarding its overall impact on the economy demonstrating that the tax also has few negative side effects would make it invaluable for developing countries looking for an effective tax instrument showing that a vat is associated with increases in growth trade or investment would be solid evidence in favor of its adoption however empirical studies of vat are rare this study seeks to fill a hole in the literature analyzing the overall economic impact of a vat which will allow policy makers to make informed decisions of the costs and benefits of this tax understanding the effects of the vat is vital as the importance of the vat is unlikely to decline in the future the imf increasingly suggests that countries raise more revenue through adopting a vat or raising vat rates bird 2010 many countries facing rising pressures on pension programs as a result of changing demographics are funding social programs from general revenues rather than payroll taxes which usually means shifting the overall tax composition of government revenues toward vats bird and smart 2012 a vat is a requirement for eu membership and other international organizations are considering their own mandatory vats with a unified set of rules and repayment systems at an international rather than national level such as the gulf cooperation countries cnossen 1998 kapur 2012 as more countries adopt vats international payment mechanisms for collecting vats will become more efficient ebrill et al 2001 and vats will become more popular in the future as a country chooses when to enact a vat simply estimating the effect of adoption on macroeconomic variables such as trade or growth through normal regression techniques will result in biased estimates as countries that choose to adopt a vat may be fundamentally different from those who do not in order to solve this selection problem i use survival analysis to generate probabilities of vat adoption to be used as propensity score for 192 countries from 1967 to 2012 i then employ matching methods to obtain the causal effects of vat adoption among 112 countries 90 of which do eventually adopt from 1986 to 2007 in the year of adoption and for 5 years after 1 the results of this study reveal that vat adoption is associated with increases in investment and less robustly increases in growth as well as decreases in inflation and government spending there is no evidence of changes in trade once controlling for selection 2 this study is organized as follows section ii covers background on previous studies on the vat and other tax policies section iii describes the adoption equation using survival analysis both its determinants and results section iv introduces the matching process section v describes the results of the matching as well as some robustness checks section vi concludes ii background starting with france in 1954 and reaching its first developing country in 1960 when it was enacted by the cote d ivoire 166 countries have at some point implemented a vat as of january 2013 and once passed nearly all countries retain it figure 1 shows aggregate vat adoption over time and figure 2 shows the adoptions in each year

network competition ii price discrimination our companion article developed a clear conceptual framework of negotiated or regulated interconnection agreements between rival operators and studied competition between interconnected networks under the assumption of nondiscriminatory pricing this article relaxes this assumption and allows networks to charge different prices for calls terminating on the subscriber s network and those terminating on a rivals network this creates a price differential between services that are identical for the consumer and generates network externalities despite network interconnection we show that in both the mature and entry phases of the industry the nature of competition is substantially affected by such price discrimination

cost function estimation and quality bias the regulated automobile insurance industry this article explores the implications of endogenous product quality and therefore endogenous output in the empirical estimation of cost functions for regulated automobile collision insurance firms it contains a structural model of such a firm and provides an illustration of the types of biases that can result if data on quality of service are unavailable or otherwise omitted the analysis shows how the directions of biases depend on the nature of the variations in the observed nonquality data a new test suggests that such bias is present in insurance cost functions

fiscal stress and the production of public safety a distance function approach abstract faced with increasing crime rates but nonincreasing budgets local governments are seeking cost saving means of providing public safety this paper investigates a bureaucracy s response to fiscal stress as well as its ability to efficiently substitute civilian for uniformed personnel exploiting duality theory a distance function is used to model technology retrieve information concerning substitutability and shadow prices of personnel and test for cost minimization morishima elasticities are adopted to allow for asymmetry in substitution between types of personnel it is found that the more adverse the public safety environment and budgetary condition the more efficiently resources are allocated

the effect of social security on labor supply a cohort analysis of the notch generation this article uses aggregate birth year calendar year level data derived from the current population survey cps to estimate the effect of social security wealth on the labor supply of older men in the 1970s and 1980s the analysis focuses on measuring the impact of the 1977 amendments to the social security act which created a substantial unanticipated reduction in social security wealth for individuals born after 1916 this differential in benefits has become known as the benefit notch results indicate that labor supply continued to decline for the notch babies who received lower social security benefits than earlier cohorts

the impact of age pension eligibility age on retirement and program dependence evidence from an australian experiment abstract governments around the world are reforming their social security systems in light of the challenges posed by population aging we study the 1993 australian age pension reform which progressively increased the eligibility age for women from 60 to 65 years we find economically significant responses to the reform an increase in the eligibility age of one year induced a decline in the probability of retirement by 12 to 19 percentage points in addition the reform induced significant program substitution with increases in enrollment in other social insurance programs particularly the disability support pension which effectively functioned as an alternative source of retirement income

an analysis of returns to scale in public production with an application to fire protection abstract this paper analyzes returns to scale in public production existing studies fail to differentiate among three dimensions of scale service quality the level of governmental activity and the number of people served a fourth dimension economies of scope is need for agencies that provide multiple services this paper provides a formal definition of returns to scale for each dimension this framework is applied to fire protection using a translog cost function with two services fire prevention and fire suppression the results indicate economies of scope increasing returns to quality scale and constant returns to population scale

policy variation labor supply elasticities and a structural model of retirement this paper exploits a combination of policy variation from multiple pension reforms in austria and administrative data from the austrian social security database using the policy changes for identification we estimate social security wealth and accrual elasticities in individuals retirement decisions next we use these elasticities to estimate a dynamic programming model of retirement decisions finally we use the estimated model to examine the labor supply and welfare consequences of potential social security reforms

social security and cross country differences in hours a general equilibrium analysis abstract i develop a general equilibrium life cycle model with an intensive and extensive margin of labor supply and endogenous human capital accumulation i use the model to assess the effects of changes to various features of social security on labor supply outcomes of particular interest are changes to the scale of the program and to the relevant eligibility rules i find that the cross country differences in social security programs account for at least 79 of the differences in employment rates of people aged 55 64 and 17 31 of the differences in aggregate hours worked between the us and continental europe

labor supply responses to marginal social security benefits evidence from discontinuities abstract a key question for social security reform is whether workers respond to the link on the margin between the social security taxes they pay and the social security benefits they will receive we estimate the effects of the marginal social security benefits that accrue with additional earnings on three measures of labor supply retirement age hours and labor earnings we develop a new approach to identifying these incentive effects by exploiting five provisions in the social security benefit rules that generate discontinuities in marginal benefits or non linearities in marginal benefits that converge to discontinuities as uncertainty about the future is resolved we find that individuals approaching retirement age 52 and older respond to the social security tax benefit link on the extensive margin of their labor supply decisions we estimate that a 10 increase in the net of tax share reduces the two year retirement hazard by a statistically significant 2 0 percentage points from a base rate of 15 the evidence with regard to labor supply responses on the intensive margin is more mixed we estimate that the elasticity of hours with respect to the net of tax share is 0 42 and statistically significant but we do not find a statistically significant earnings elasticity though we lack statistical power to estimate results within subsamples precisely the retirement response is driven mostly by the female subsample while the hours response comes from the male subsample

time to retire the effect of state fiscal policies on retirement decisions our research addresses the importance of state fiscal policies on the probability of retirement using a panel of individual tax return data results indicate that a one percentage point increase in the income or sales tax rate reduces the probability of retirement by about 8 7 percent the evidence suggests that state spending might also affect retirement decisions but magnitudes are inconclusive in general the results suggest that the income effect dominates that is higher tax rates at the state level reduce disposable income and decrease the probability of retiring results are similar in models examining single and married filers separately

a life cycle model of health and retirement the case of swedish pension reform abstract sweden is one of the few western economies to have undertaken a large pension reform in recent years this was done with great expectations but little formal analysis in this paper we develop a life cycle labor supply model to quantify the predicted labor supply implications of this reform in our framework individuals choose when to stop working and given eligibility criteria when if to apply for disability and pension benefits agents are heterogeneous in skills and receive exogenous shocks to health throughout their life we find that the new pension system creates large incentives for the continued employment of older workers this is promising news for countries grappling with pension reform and indicates that there are significant lessons to be learned from the swedish case

pension enhancements and the retention of public employees the authors use data from workers in the largest public sector occupation in the united states teaching to examine the effect of pension enhancements on employee retention specifically they study

health insurance and the labor supply decisions of older workers evidence from a u s department of veterans affairs expansion this paper exploits a major mid 1990s expansion in the u s department of veterans affairs health care system to provide evidence on the labor market effects of expanding health insurance availability using data from the current population survey we employ a difference in differences strategy to compare the labor market behavior of older veterans and non veterans before and after the va health benefits expansion to test the impact of public health insurance on labor supply we find that older workers are significantly more likely to decrease work both on the extensive and intensive margins after receiving access to non employer based insurance workers with some college education or a college degree are more likely to transition into self employment a result consistent with job lock effects however less educated workers are more likely to leave self employment a result suggesting that the positive income effect from receiving public insurance dominates the job lock effect for these workers some relatively disadvantaged sub populations may also increase their labor supply after gaining greater access to public insurance consistent with complementary positive health effects of health care access or decreased work disincentives for these groups we conclude that this reform has affected employment and retirement decisions and suggest that future moves toward universal coverage or expansions of medicare are likely to have significant labor market effects

the role of information for retirement behavior evidence based on the stepwise introduction of the social security statement abstract in 1995 the social security administration started sending out the annual social security statement it contains information about the worker s estimated benefits at the ages 62 65 and 70 i use this unique natural experiment to analyze the retirement and claiming decision making first i find that despite the previous availability of information the statement has a significant impact on workers knowledge about their benefits these findings are consistent with a model where workers need to gather costly information in order to improve their retirement decision second i use this exogenous variation in knowledge to analyze the optimality of workers decisions several findings suggest that workers do not change their retirement behavior i workers do not change their expected age of retirement after receiving the statement ii monthly claiming patterns do not show any change after the introduction of the social security statement iii workers do not become more sensitive to social security incentives after receiving the statement more research is needed to establish whether workers are already behaving optimally but the information contained in the statement is not sufficient to improve their retirement behavior

the determinants of efficiency in municipal governments this article investigates efficiency in the municipal sector of the region of murcia spain with that aim data of 31 municipalities 69 of the response rate have been collected services analysed are police culture sports green areas refuse collection and water supply ratios of efficiency have been related to other control variables such as economic level size of the municipality decentralization political sign and financial situation a weak positive relation between economic level and efficiency arises some weak evidence also exists that public management of refuse collection is more efficient than private in water supply public management by means of a company controlled by the local government is clearly more efficient than private it also seems that the higher the tax burden the greater the efficiency in providing services

economic determinants of workers retirement decisions the landscape for older workers has changed dramatically in recent decades governments have made cuts to public pension programs private pensions have shifted from defined benefit to defined contribution plans equity and housing markets have been unusually volatile and workers have experienced declining morbidity and mortality at the same time the labor force participation rate for older men and women has been rising over the past two decades implying later retirement are these phenomena related this paper reviews the large and growing body of literature exploring the economic determinants of workers retirement decisions including public and private pensions wealth and savings health and health insurance and labor demand

labor market shocks and retirement do government programs matter abstract this paper argues that labor market conditions are an important and often overlooked determinant of retirement transitions in our analysis we examine how the unemployment rate affects retirement and whether the social security ss system and unemployment insurance ui system influence how older workers respond to labor market shocks we use pooled cross sectional data from the march current population survey cps in our analysis we find that downturns in the labor market increase retirement transitions and that 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 facing older workers interestingly retirements only increase in response to an economic downturn once workers become ss eligible suggesting that retirement benefits may help to 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

parallel imports demand dispersion and international price discrimination parallel imports goods imported by unauthorized resellers are advocated worldwide for undermining international price discrimination for a continuum of markets we find that uniform pricing by a monopolist yields lower global welfare than third degree discrimination if demand dispersion across markets is large though uniform pricing avoids output misallocation too many markets go unserved mixed systems permitting discrimination across but not within designated groups of markets yield significantly higher welfare than uniform pricing or unrestricted multimarket discrimination and can pareto dominate uniform pricing thus while parallel imports might benefit some countries our results weaken the multilateral case for allowing them

labor force dynamics of older men this paper describes and analyzes movements of older men among labor force states in the united states using quarterly observations derived from the retirement history survey rhs the results indicate substantial undercounts in the biannual data indicating that the prevalence of labor force movements at older ages has been underestimated previously the results show that labor force dynamics at older ages are important including duration and spell occurrence dependence and work experience effects these effects are robust to nonparametric controls for unobserved heterogeneity the estimates indicate that social security benefits have strong effects on the timing of labor force transitions at older ages but that changes in social security benefit levels over time have not contributed much to the trend toward earlier labor force exit excerpt

economic determinants of workers retirement decisions economic determinants of workers retirement decisions the landscape for older workers has changed dramatically in recent decades governments have made cuts to public pension programs private pensions have shifted from defined benefit to defined contribution plans equity and housing markets have been unusually volatile and workers have experienced declining morbidity and mortality at the same time the labor force participation rate for older men and women has been rising over the past two decades implying later retirement are these phenomena related this paper reviews the large and growing body of literature exploring the economic determinants of workers retirement decisions including public and private pensions wealth and savings health and health insurance and labor demand

reconsidering the social security notch and retirement wealth and incentive effects using the health and retirement study we show that studies using the social security notch cannot separately identify the effects of retirement wealth and forward looking incentives on retirement because the notch natural experiment changed both factors in offsetting ways

economic determinants of the optimal retirement age an empirical investigation in this paper we examine how the structures of earnings social security and pension benefits affect retirement behavior we use an intertemporal model of labor supply paying special attention to the institutional features of private pensions and social security benefits this theoretical formulation produces comparative dynamic predictions and guides empirical modeling data from a new survey of workers and their income opportunities are used to implement the empirical model on the basis of empirical retirement estimates we conclude that 1 people with higher base wealth retire earlier and 2 those who expect to gain more by postponing retirement retire later

the flypaper effect and other anomalies abstract i develop a model in which income both in its own right and as a proxy for other socioeconomic characteristics is an input in the production function for local public services the most obvious example is education though there are other applications as well the comparative statics results from this model yield the following results 1 the observed flypaper effect the tendency for local government to spend a higher fraction of unrestricted grants than income of residents may be due at least in part to the fact that own income but not grants is a substitute for purchased inputs in the technology hence the propensity to spend on purchased inputs out of own income is lower than out of grants 2 the income elasticity of demand for public sector output may be higher than the observed income elasticity of demand for purchased inputs 3 equalization of educational opportunity via wealth neutrality as suggested by feldstein requires major changes in education finance once we recognice the distinction between purchased inputs and output

future social security entitlements and the retirement decision abstract a critical question for social security policy is how program incentives affect retirement behavior we use the health and retirement survey hrs to examine the impact of social security incentives on male retirement we implement forward looking models whereby individuals consider the incentives to work in all future years we find that forward looking incentive measures for social security are significant determinants of retirement we also find that private pension incentives have roughly similar effects our findings suggest that social security policies that increase the incentives to work at older ages can significantly reduce the labor force exit rate of older workers

production of public safety are socioeconomic characteristics of local communities important factors this paper uses the translog cost function and cross section data from florida to investigate the importance of socioeconomic characteristics sec of local communities in the production of public safety the approach used is noteworthy in four respects 1 the underlying production function is specified as an agem production function 2 sec are treated as non purchased fixed inputs 3 two variables are used to proxy sec in estimation and 4 the paper test for the existence of endogenous quality differences in safety it is shown that exclusion of sec from the production cost function of safety leads to misspecification and hence they provide a misleading guide to policy

honey i shrunk the kids benefits revisiting intergenerational conflict in oecd countries intergenerational conflict may arise when the interests of different age groups do not align we examine cross country data to find evidence for this conflict in oecd countries we derive our results from a fgls estimation model which is complemented by a system gmm estimation to account for potential endogeneity the data are from a panel of 22 oecd countries over the time period 1985 2005 we find little support for intergenerational conflict in general however those who are close to statutory retirement age dislike public expenditure on families and education because once they retire they will have less income compared to their work income this effect is transitory however implying a change in voting behavior during retirement age

education achievement in segregated school systems the effects of separate but equal educational achievement in segregated school systems was considerably lower in the black schools than in the white schools economic historians have argued that the racial achievement gap reflected the discriminatory funding of the black schools this paper assesses counterfactually the historical effects of a separate but equal policy of educational finance using cross sectional data from 1930 and 1940 i estimate race specific educational production functions eliminating race differences in inputs supplied by school boards explains 40 50 percent of the racial achievement gap depending on how achievement is measured the remainder appears to reflect the impact of family background on achievement of which the most important effect was adult black illiteracy a legacy of slavery and educational backwardness in the late 19th century the paper also shows how school boards marginal valuation of black achievement can be recovered from the production function estimates compared to preferences that would have led them to voluntarily practice equality southern school boards judged black achievement to be worth roughly half the value they placed on white achievement this abstract was borrowed from another version of this item

secular changes in the work and retirement patterns of older men this paper examines trends in the work and retirement patterns of males aged 58 to 63 in 1969 and 1989 respectively the labor force attachments of this group have fallen for reasons unrelated to changes in individual characteristics or occupational attainment especially sharp reductions at age 62 hint at an increasingly important role for the early retirement provisions in social security attachments to longest jobs have also declined substantially beginning at age 55 although pension incentives may be significant the observed correlations between pensions and employment status may also reflect the role of confounding factors such as poorly measured nonpension wealth

how does social security claiming respond to incentives considering husbands and wives benefits separately abstract most women receive some social security benefits based upon their husbands earnings history but husbands benefit claiming is inconsistent with maximizing lifetime benefits for the couple i show that husbands claiming behavior responds to the actuarial incentives from their retired worker benefits not responding to incentives from spouse and survivor formulas reduces wives lifetime benefits rule changes to the social security benefit calculation the age difference between spouses and the relative strength of the wife s labor force history creates variation in incentives segments of the population predicted to be more responsive to incentives provides similar results to the main specification

elasticity of factor substitution in police agencies evidence from florida a multiproduct translog cost function is estimated and used to calculate elasticities of factor substitution in the production of police services the data come from florida s municipal police departments and are for 1982 1983 it is found that substitution elasticities between any pair of inputs in police production are significantly different from unity this result is inconsistent with the cobb douglas production function a functional form that has been extensively employed in empirical studies of police production

how social security and medicare affect retirement behavior in a world of incomplete markets this paper provides an empirical analysis of how the u s social security and medicare insurance system affect the labor supply of older males in the presence of incomplete markets for loans annuities and health insurance we estimate a detailed dynamic programming dp model of the joint labor supply and social security acceptance decision focusing on a sample of males in the low to middle income brackets whose only pension is social security the dp model delivers a rich set of predictions about the dynamics of retirement behavior and comparisons of actual vs predicted behavior show that the dp model is able to account for wide variety of phenomena observed in the data including the pronounced peaks in the distribution of retirement ages at 62 and 65 the ages of early and normal eligibility for social security benefits respectively we identify a significant fraction of health insurance constrained individuals who have no form of retiree health insurance other than medicare and who can only obtain fairly priced private health insurance via their employer s group health plan the combination of significant individual risk aversion and a long tailed pareto distribution of health care expenditures implies that there is a significant security value for these individuals to remain employed until they are eligible for medicare coverage at age 65 overall our model suggests that a number of heretofore puzzling aspects of retirement behavior can be viewed as artifacts of particular details of the social security rules whose incentive effects are especially strong for lower income individuals and those who do not have access to fairly priced loans annuities and health insurance

race and human capital comment according to human capital theory changes in the racial schooling gap are a key factor in the historical evolution of blackwhite male income ratios in a recent paper in this review 1984 james smith points out a basic paradox in the human capital explanation race differences in years of schooling have diminished sharply and continuously for male cohorts born in the twentieth century black white male income ratios however rose only slightly in the aggregate before 1960 after 1960 the ratios increased appreciably smith resolves the paradox by constructing new estimates of the racial schooling gap for cohorts stretching back to the civil war based on retrospective educational attainment data from the 1940 and subsequent censuses race differences in years of schooling widened among males born from 1886 to 1910 additionally the quality of black schooling fell relative to the quality of white schooling since these cohorts dominate the census occupation and income statistics until 1960 smith claims the relative constancy of black white income ratios until 1960 is consistent with the human capital model this comment challenges one of smith s conclusions the increase in the racial schooling gap is shown to be spurious scholars often interpret census attainment data as a measure of years of schooling but the data refer to highest grade completed historically the average black pupil took longer than a single school year to complete a grade retention alone would not bias the census attainment data most blacks born in the late nineteenth century however were educated in ungraded schools for them census attainment data measure years of schooling not grades the shift from ungraded to graded schools took place throughout the period of educational retrogression identified by smith it is the change from years to grades that causes black schooling levels to appear to lag behind white schooling levels consistent data show a continuously decreasing racial schooling gap whatever the merit of smith s explanation it cannot rest on census attainment data beginning in 1890 the u s bureau of the census reported school attendance rates for narrow age groups for example ages 5 to 9 1 i use these data to construct new estimates of average years of schooling in the following manner let p j proportion of children of age j at school a e minimum age at entering school and a l maximum age at leaving school i assume that a e 5 and a l 20 since attendance rates before age 5 or after age 20 were negligible for the period because data are unavailable for single years of age i also assume the agespecific attendance rates are equal to the average attendance rate for the relevant age 2 j a l group the sum ej a e p j estimates average years of schooling 3 empirically the number of students who skip a grade is less than the number who fail the grade hence average years of schooling should exceed average highest grade completed table 1 presents the cohort specific estimates of years of schooling according to my calculations the racial schooling gap fell from 3 8 years among 1886 90 cohorts to 2 5 years among 1906 10 cohorts according

additive general error models for production cost and derived demand or share systems many empirical studies of production specify a deterministic model of the firm derive the implied behavioral equations input demand or share system and then embed this system in a stochastic framework by tacking on linear error terms in contrast this paper proposes general error models gems in which the error specification is an integral part of the optimization model these models are the statistical embodiment of stigler s view that apparent observed inefficiencies reflect the investigator s ignorance of the true optimization problem additive gems are proposed and interpreted specification tests indicate that a translog additive gem is superior to the standard translog specification

training and retirement patterns life cycle theory predicts that employers enter into implicit contracts with newly hired employees to ensure rent sharing and to decrease turnover after firm specific training investments typically these implicit contracts would include both upward sloping earning profiles and mandatory retirement in this article we empirically test the prediction that workers with firm specific skills are restrained in their options to continue working therefore they are more likely to retire at common mandatory retirement dates than those with general skills using the us national longitudinal survey of older men we find that workers who participated in firm specific training in their early careers do indeed retire earlier than those with general skills the results show that compulsory retirement plans force these older workers to retire when they reach the common mandatory retirement age of 65 the results presented in this article are highly relevant for public policies in european and other industrialized cou

worker retirement responses to pension incentives do they respond to pension wealth abstract pension enhancements generate pension wealth spikes at the eligibility milestones i analyze two major enhancements that generated different gains in pension wealth for eligible workers the responsiveness of retirement behavior to these enhancements depends on how well workers understand their pension incentives to test the retirement response to pension wealth i use administrative data from missouri teachers and leverage variation in enhancement impacts on teacher pension wealth owing to differences in teachers entering ages i find that retirements respond strongly to pension enhancements but the strength of the response does not align with their pecuniary value my findings contribute to a growing body of research showing that workers have imperfect knowledge of their pension benefits and they use imprecise information to make retirement timing decisions

child labor and the interaction between the quantity and quality of children this article analyzes the impacts of child labor on the interaction between the quantity and quality of children in the spirit of becker and lewis it shows that without child labor the quantity of children can be a normal good so that it increases with parental income under some fairly standard formulations however the correlation between fertility and parental income becomes negative when the role of child labor is considered the model also implies that fertility increases with the wage rate of child labor moreover it suggests that government intervention not only directly affects the supply of child labor but also influences parents decisions on fertility which indirectly determines children s labor market participations

the 1983 social security reforms and labor supply adjustments of older individuals in the long run a structural life cycle retirement model with an improved specification over previous models is used to analyze and compare the long run effects on the labor supply of older workers of the 1983 social security reforms the effects of separate provisions from the 1983 amendments are examined these include the raising of the normal retirement age to 67 the increase in the delayed retirement credit to 8 and the lowering of the reduction rate for earnings over the test amount to 1 00 for every 3 00 of earnings

a structural retirement model the life cycle model analyzed here constrains most work on the main job to be full time partial retirement entails a wage reduction and frequently a job change maximum likelihood estimates of utility function parameters are designed to incorporate information on the age of leaving full time work and the age of full retirement the model closely tracks retirement behavior including peaks in retirement activity at 62 and 65 the paper explores the relation of these peaks to nonlinearities in the budget constraint created by various retirement programs policy analyses based on this and on earlier models with simpler structures are compared the retirement choice is one of the more prominent manifestations of life cycle behavior the decision is the result of an interplay between an individual s preferences and a set of incentives which change in complicated ways as the individual progresses through his or her late 50 s and 60 s the purpose of this study is to formulate and estimate a structural model which incorporates in a fundamental way this interplay between lifetime preferences and incentives and to illustrate how such a model may be used to investigate retirement behavior a structural model of this type is essential for analyzing potential policy changes which can be expected to affect incentives in varying ways over a number of years in the life cycle the current study incorporates two structural features which have frequently been omitted from previous studies first the model requires that an individual who wishes to reduce work effort below full time must accept a reduced hourly wage rate in order to do so this reflects empirical evidence from micro data sets which indicates that around one third of older individuals engage in part time work at one time or another and that regardless of whether or not these older workers change jobs to obtain part time work they usually take wage cuts as compared to their previous full time work 2 the fact that an individual is willing to accept a lower wage rate in return for the opportunity to work fewer than full time hours contains important information about the preferences of the

network competition i overview and nondiscriminatory pricing we develop a model of unregulated competition between interconnected networks and analyze the mature and transition phases of the industry in this deregulated environ ment networks pay negotiated or regulated access charges to each other and com pete in prices for customers we show that a competitive equilibrium may fail to exist for large access charges or for large network substitutability and that freely negotiated access charges may prevent effective competition in the mature phase of the industry and erect barriers to entry in the transition toward competition last we examine the meaning and impact of policies such as the efficient component pricing rule

international telecom settlements gaming incentives carrier alliances and pareto superior reform liberalized countries that allow competition in international telecommunications favor traffic re routing practices as arbitrage against foreign monopolists this view is seriously incomplete monopolists allied with carriers in liberalized countries can use these practices to reduce termination payments to nonalliance carriers thereby harming also consumers in liberalized countries by gaming regulations that require equal termination rates at both ends and proportional return the monopolist s traffic is allocated among carriers in proportion to their shares of traffic to its country we also present a simple bilateral settlements reform that eliminates gaming incentives and other proportional return distortions yet benefits both countries

does raising the early retirement age increase employment of older workers two pension reforms in austria increased the early retirement age era from 60 to 62 for men and from 55 to 58 25 for women we find that raising the era increased employment by 9 75 percentage points among affected men and by 11 percentage points among affected women the reforms had large spillover effects on the unemployment insurance program but negligible effects on disability insurance claims specifically unemployment increased by 12 5 percentage points among men and by 11 8 percentage points among women the employment response was largest among high wage and healthy workers while low wage and less healthy workers either continued to retire early via disability benefits or bridged the gap to the era via unemployment benefits taking spillover effects and additional tax revenues into account we find that for a typical birth year cohort a one year increase in the era resulted in a reduction of net government expenditures of 107 million euros for men and of 122 million euros for women

divisionalization and entry deterrence this paper assumes that incumbent firms can create new independent divisions more cheaply than potential entrants who must incur the additional overhead costs of new entry the main theoretical result is that such divisionalization ability leads perfectly informed incumbents to preempt all rational entry into their industries in contrast existing models of entry deterrence imply that informed incumbents even those with steadily decreasing average costs will often allow rational entry our result may explain why successful large scale entry by firms with no informational advantage is extremely rare the use of divisions to preempt entry may also explain why large firms in high profit oligopolies often divisionalize allowing their divisions to compete freely despite the negative pecuniary externality that each division imposes on others

the effects of pension funds on markets performance a review the worldwide reforming process of pension systems triggered by the demographic transition and globalization has led several countries to implement multi pillar pension systems and enhance pension funds for this reason the studies on the effects that pension funds exert on markets performance have been flourishing in the last decades in this paper we provide an updated review of the empirical advances in this field of study with particular focus on the effects that pension funds produce on labour markets financial markets and economic growth

do immigrants delay retirement and social security claiming we use data from the health and retirement study hrs to examine how immigrants retirement and social security claiming patterns compare to those of natives we find that immigrants retire and cl