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

an evaluation of the life cycle effects of minimum pensions on retirement behavior in this paper we explore the effects of the minimum pension program on welfare and retirement in spain this is done with a stylized life cycle model which provides a convenient analytical characterization of optimal behavior we use data from the spanish social security to estimate the behavioral parameters of the model and then simulate the changes induced by the minimum pension in aggregate retirement patterns the impact is substantial there is a threefold increase in retirement at 60 the age of first entitlement with respect to the economy without minimum pensions and total early retirement before or at 60 is almost 50 larger copyright 2007 john wiley sons ltd

an experimental test on retirement decisions i introduction the reform of social security systems is now one of the main issues on the economic policy agenda of most industrialized countries it is widely considered that unless serious changes take place the aging of the population implying a rise in the number of retirees relative to that of workers will threaten the viability of pay as you go public pension systems in the long run this threat is being reinforced by the progressive reduction in the retirement age of the working population the central reforms that are being proposed to neutralize these future financing problems are the raising of the contribution rate the decreasing of pension benefits or and the delay of the retirement age with reference to this latter reform as blondal and scarpetta 1998 state a direct way to encourage people to work longer would be to raise the pensionable age but delaying the retirement age may not be very popular according to recent surveys most workers claim that they are happy with the current retirement age see cremer and pestieau 2003 this may help to explain why reforms on the legal retirement age have currently become a very delicate matter for governments 1 on the other hand pension systems in virtually all organization for economic cooperation and development oecd countries in the mid 1990s made it financially unattractive to work after the age of 55 see gruber and wise 1997 or blondal and scarpetta 1998 indeed the general consensus in the theoretical literature related to social security and retirement decisions is that pension systems create enormous incentives to leave the labor force early 2 therefore increasing the retirement age as a tool to improve the financial problems of public pensions systems faces two sensitive problems the opposition of workers to a delay in the standard retirement age and the disincentives to continuous work being embedded in the pension system the large decline in labor force participation is attributed to the specific fact that to keep on working implies a reduction in the present value of total pension benefits the terms old age pension wealth and implicit tax on postponing retirement have been frequently used to illustrate these disincentives in the pension system the old age pension wealth is the discounted value of expected pension benefits minus the discounted cost of obtaining such benefits after the earliest age at which pensions can be accessed working for an extra year may imply changes in this pension wealth by foregoing 1 yr of pensions paying contributions for an additional year and maybe increasing the pension benefits per year therefore if the costs of postponing retirement are higher than the gains then it is considered that the pension system is implicitly taxing to prolong the working period that is the drop in pension wealth acts as an implicit tax on income from continued work and as such is a clear incentive to retire early actually reforms aiming to increase the effective retirement age to improve the financial problems of public pensions systems have mainly focused on the reduction of this implicit tax on prolonging the working period it is also considered that when the increase in pension benefits is exactly offset by the higher cost in terms of contributions and forgone pensions the pension system is not distorting the retirement decision that is the pension systems that are marginally actuarially fair will not distort individual decisions concerning retirement age and consequently they are defined as neutral systems for this reason the main economic policy measures move in the direction of strengthening the link between lifetime contributions and pension benefits 3 indeed this reform is one of the policy conclusions of maintaining prosperity in an ageing society oecd 2000 the most appropriate reform would be to allow people to retire at the age of their own choice and to adjust pension level so that the pension system is neutral on average

interdependency of personal savings and labour force participation of the elderly and social security wealth a time series analysis using japanese annual time series data covering the period 1950 1982 our study shows that social security wealth during this period depressed personal savings as a result there was a reduction of approximately 79000 yen of wealth per capitain real terms from 1960 to 1980 however the declining labour force participation of elderly males brought about for example by earlier retirement stimulated personal savings by an estimated 13000 yen over the same period the results indicate that the benefit effect tends to outweigh the retirement effect furthermore this study has identified a negative interdependency between the level of personal savings and the retirement behaviour of elderly males a typical male worker saves more before retirement if that individual expects to stay a shorter time in the labour market retirement behaviour is less responsive to a change in personal savings behaviour than vice versa

earnings social security legislation and retirement decisions the austrian experience this paper analyses the labour supply behaviour of elderly males in austria and asks how far it is determined by the characteristics of the austrian social security system this is of particular interest because old age insurance in austria is dominated by the public pension plan so that private pension plans are of minor importance i argue that from a theoretical point of view the actuarial unfairness of the insurance plan creates a strong incentive to withdraw from the labour force at the minimum retirement age secondly the rising earnings replacement ratio might be responsible for the decreasing average retirement age these hypotheses are tested empirically a pooled time series cross sections labour force participation model is estimated for single birth year cohorts of elderly males i find strong evidence for the proposition that the age participation pattern might be determined by the incentives created by social security and that the decrease in labour force participation rates over time may

necessary conditions for infinite horizon discounted two stage optimal control problems abstract in many situations in economics one would like to analyse the optimal timing of switching between alternative and consecutive regimes a natural framework for such an analysis seems to be one of multi stage optimal control problems where the switching instants between regimes are endogenously determined the existing literature considers only the case of two stage optimal control problems with finite horizon however in many cases it seems more appropriate to consider a problem with an infinite horizon by deriving the appropriate necessary conditions for such a problem we generalise the methodology in analysing endogenous regime switches

social security and the retirement decision the effect of social security and private pensions on individual retirement decisions is modeled relaxing in turn three commonly maintained assumptions perfect capital markets actuarial fairness and certain lifetimes which together imply that there is no effect in each case raising the contribution level can cause systematic changes of either sign in general in individual retirement decisions for social security the effects associated with forced saving and deviations from actuarial fairness probably tend to advance retirement but those effects that arise solely from the insurance aspect of social security and private pensions are ambiguous in sign owing to the presence of a substitution effect that tends to delay retirement because the insurance benefits can be fully realized only by working longer

social security and retirement in uruguay abstractwe estimate a structural life cycle model for retirement behaviour using work history records of the main uruguayan pension programme the estimated coefficient of relative risk aversion is around 1 5 and the estimated discount rate is about 1 8 per cent per annum the marginal disutility of work increases with age and is larger for women than men and for private than public employees simulations show a very low impact of the 1995 pension reform on retirement ages many individuals in this population respond little to economic incentives and some individuals would advance rather than postpone retirement after the reform

the effect of social security on retirement in the early 1970s we analyze detailed longitudinal data on a cohort of males aged 58 67 in 1969 1973 a period of substantial increases in real social security benefits we find the following 1 the accelerating decline in labor force participation of elderly men in 1969 1973 can be explained by the large increase in real social security benefits 2 there is evidence of a liquidity constraint effect for an important subgroup of the elderly 3 the magnitude of this induced retirement effect is large enough that ignoring it can lead to serious underestimation of the fiscal implications of changes in benefit provisions our results are interpreted in the historical context of a particular cohort undergoing major unanticipated transfers of wealth the steady state effects of social security on retirement may not be the same

social security retirement age and optimal income taxation it is often argued that implicit taxation on continued activity of elderly workers is responsible for the widely observed trend towards early retirement in a world of laissez faire or of first best efficiency there would be no such implicit taxation the point of this paper is that when first best redistributive instruments are not available because some variables are not observable the optimal policy does imply a distortion of the retirement decision consequently the inducement of early retirement may be part of the optimal tax transfer policy we consider a model in which individuals differ in their productivity and their capacity to work long and choose both their weekly labor supply and their age of retirement we characterize the optimal non linear tax transfer that maximizes a utilitarian welfare function when weekly earnings and the length of active life are observable while individuals productivity and health status are not observable c 2003 elsevier b v all rights reserved

on government deficits and speculation the authors consider a dynamic stochastic general equilibrium model with a representative consumer investor and two producing firms all the assets are real investments of capital into productive processes government expenditures taxes and money financing are explicitly incorporated the holding of money is modeled through a cash in advance constraint fundamental budget deficits generated by flat rate expenditure and income tax rules can be financed by printing money or randomly levying temporary wealth taxes modeled as a poisson process characterization and properties of the balanced budget rational expectations equilibrium are analyzed it is shown that government may promote growth by adjusting the fundamental deficit copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

savings and pensions some uk evidence the sort of problem we shall be interested in is the following how much does a small change in a mature pay as you go pension scheme change aggregate current consumption in the context of a community of workers and pensioners with a variable retirement date and a pension scheme where the government taxes workers to pay pensions two sorts of effects have been posited first changes in pensions re distribute current disposable income this may lead to changes in aggregate consumption the redistribution effect secondly future pension rights constitute a form of wealth and unanticipated changes in the size or composition of wealth holdings may affect current consumption plans wealth effects see gultekin and logue i979 for a survey and references looking at the redistribution effect we observe that if pensioners have a higher short run marginal propensity to consurme than workers and the same long run marginal propensity to consume then an increase in pensions will ceteris paribus raise aggregate consumption initially but cause it to fall in the medium run the long run elasticity will be zero turning to wealth effects we distinguish two principal elements firstly an unanticipated increase in pensions in a pay as you go scheme increases the lifetime income of pensioners and workers close to retirement for workers who intend retiring at pensionable age this will lead to an increase in current consumption so long as it is a normal good this income effect will be less marked for workers at the beginning of their working life since the net income effect may even be negative for many workers as time goes by the aggregate net income effect consequent on a rise in pensions is diminished so that we would expect to see an initial rise in consumption followed by a very slow decline in incremental consumption the long run elasticity of mean consumption with respect to a rise in pensions would be zero note that imperfections in the capital market are unlikely to modify these conclusions since those who wish to increase their consumption are likely to have savings that can be reduced whilst those for whom borrowing constraints are binding i e younger workers are unlikely to wish to increase current consumption by much anyway there are two important caveats to the above the first is that workers who intend to work after the pensionable age may decrease current consumption if the increase in pensions induces a large enough fall in planned post pensionable age labour supply see crawford and lilien i98i for a theoretical discussion

real vs financial investment can tobin taxes eliminate the irreversibility distortion abstract in the recent past several developing countries have failed to achieve significant real capital investment despite episodes of large capital inflows although there are real projects with seemingly high returns investors prefer to wait for the correct time to invest in this paper we address this issue by considering a two sector economy where investment in real capital is irreversible and debt financed furthermore the interest rate which is determined in the financial sector is random as a result of volatile expectations in this economy the expected return on real capital is above the expected interest rate this is because the option to wait for lower interest rates has a positive value in the presence of rumors taxes on international financial transactions tobin taxes reduce the variance of the domestic interest rate while leaving its mean unchanged as a result they induce more investment in irreversible real capital the model borrows from the irreversible investment literature a difference with other models is that the source of noise is a mean reverting process not just a geometric brownian motion we solve for the optimal decision rule using the girsanov theorem of the maxims of orthodox finance none surely is more anti social than the fetish of liquidity it forgets that there is no such thing as liquidity of investment for the society as a whole the introduction of a substantial government transfer tax on all transactions might prove the most serviceable reform available with a view to mitigating the predominance of speculation over enterprise keynes the general theory

markets with untraceable goods of unknown quality beyond the small country case when importing durables and nondurables consumers often cannot discern quality prior to purchase if they cannot also identify the individual producer exporters have diminished incentives to produce high quality goods to raise the quality of traded experience goods previous international literature has proposed consolidation of export firms and the imposition of export quotas policies that may be appropriate for tiny taiwan but not a colossus like china we contribute to this literature in three ways first we explicitly model the way in which consumers of experience goods rely on the reviews of previous buyers who in turn rely on the reviews of buyers before them when deciding whether to purchase an experience good second we endogenize the price of any given quality third we assume that firms may exercise market power as we show once the small country assumption is dropped policies advocated in the literature such as the merger of exporters or the imposition of export quotas can have adverse consequences on the profits of domestic exporters and on the welfare of all consumers on the other hand the unilateral imposition of minimum quality standards will increase the profits of domestic exporters while improving the welfare of all consumers

on the effectiveness of capital controls the experience of colombia during the 1990s abstract this paper analyzes the effectiveness of capital controls in colombia the evidence presented points towards a relative inability of the measures adopted to reduce the level of capital inflows nonetheless the evidence suggests that non remunerated deposits have been successful in inducing a recomposition of foreign liabilities in favor of long term maturities it is likely that this is a positive result as it has made the country less vulnerable to a reversal in capital flows in this sense controls may be viewed as an effective way of internalizing the negative externality imposed by short term maturities

social security and private saving a reconsideration of the assumptions whether social security discourages private saving has been the focus of an ongoing debate since feldstein s 1974 paper on that paper he assumes that people expect after retirement social security benefits to increase at an annual real rate of 2 in this paper using a wide sample of cross section data we estimate people expected real rate of growth of after retirement social security benefits the estimates range between 0 63 and 0 76 depending on the specification used the obtained estimates are far different from the 2 imposed ad hoc by feldstein these estimates will presumably imply lower values of the social security wealth variable this casts a serious doubt on the strong depressing effect of social security on private saving

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

liquidity capital controls and exchange rates abstract we present a two country extension of lucas 1990 work on how cash in advance constraints in asset markets affect the pricing of financial assets in the model there is some degree of separation between the goods markets and the asset markets and money is used for transactions in both markets the main results of the paper are the following first the equilibrium level of the exchange rate depends on the share of money used for asset transactions a greater share corresponds to a more appreciated currency second capital controls in the form of taxes on foreign asset acquisitions tend to appreciate the exchange rate third the maturity structure of the public debt affects the equilibrium exchange rate in particular a move towards a longer maturity structure will tend to depreciate the exchange rate jel 31

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

the globalization of liberalization policy diffusion in the international political economy one of the most important developments over the past three decades has been the spread of liberal economic ideas and policies throughout the world these policies have affected the lives of millions of people yet our most sophisticated political economy models do not adequately capture influences on these policy choices evidence suggests that the adoption of liberal economic practices is highly clustered both temporally and spatially we hypothesize that this clustering might be due to processes of policy diffusion we think of diffusion as resulting from one of two broad sets of forces one in which mounting adoptions of a policy alter the benefits of adopting for others and another in which adoptions provide policy relevant information about the benefits of adopting we develop arguments within these broad classes of mechanisms construct appropriate measures of the relevant concepts and test their effects on liberalization and restriction of the current account the capital account and the exchange rate regime our findings suggest that domestic models of foreign economic policy making are insufficient the evidence shows that policy transitions are influenced by international economic competition as well as the policies of a country s sociocultural peers we interpret the latter influence as a form of channeled learning reflecting governments search for appropriate models for economic policy

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

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

postponing retirement the political effect of aging abstract conventional economic wisdom suggests that because of the aging process social security systems will have to be retrenched in particular retirement age will have to be largely increased yet is this policy measure feasible in oecd countries since the answer belongs mainly to the realm of politics i evaluate the political feasibility of postponing retirement under aging in france italy the uk and the us simulations for the year 2050 steady state demographic economic and political scenario suggest that retirement age will be postponed in all countries while the social security contribution rate will rise in all countries but italy the political support for increasing the retirement age stems mainly from the negative income effect induced by aging which reduces the profitability of the existing social security system and thus the individuals net social security wealth

real transfers in fixed exchange rate systems and the international adjustment mechanism abstract fixed exchange rates can be maintained by different types of stabilization schemes this paper takes a look at some alternative institutional settings and shows that there is an inherent redistribution mechanism in some of them that will influence the world allocation of consumption an examination of the global adjustment to monetary disturbances illustrates some interesting implications of the institutional differences between alternative systems the results suggest that the description of the international adjustment mechanism under fixed exchange rates given by the monetary approach to the balance of payments is valid only under quite restrictive assumptions

exchange controls capital controls and international financial markets this paper examines the effects of restrictions on international financial m arkets in a general equilibrium rational expectations model of a two country world state contingent financial markets allow households t o allocate wealth optimally across states so that the imposition of e xchange and capital controls has roughly speaking only substitution effects but no wealth effect taxes or quantitative controls on purc hases of foreign currency and on the income from foreign assets reduc e international trade in goods lower ex post welfare in the country in which they are imposed and affect nominal prices and the exchange rate copyright 1988 by american economic association

fair retirement under risky lifetime a premature death unexpectedly brings a life and a career to their end leading to substantial welfare losses we study the retirement decision in an economy with risky lifetime and compare the laissez faire with egalitarian social optima we consider two social objectives 1 the maximin on expected lifetime welfare allowing for a compensation for unequal life expectancies and 2 the maximin on realized lifetime welfare allowing for a compensation for unequal lifetimes the latter optimum involves in general decreasing lifetime consumption profiles as well as raising the retirement age this result is robust to the introduction of unequal life expectancies and unequal productivities

social security growth and welfare in overlapping generations economies with or without annuities we examine the impact of a stylized pay as you go paygo social security program in an economy of overlapping generations with equilibrium growth we adopt realistic mortality and other demographic assumptions and allow for the presence or absence of life annuities in all cases steady state economies with paygo social security programs grow more slowly than those without also we find that lifetime expected utilities are lower for existing and future households in steady state economies with social security we also report the effect of social security on the age profile of consumption and explore the effects of longer life expectancy compensating social security program changes and capital subsidies

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

capital controls and international trade finance abstract this paper studies the effects of prohibiting individuals from holding foreign assets but of allowing firms to trade in foreign assets only up to what is needed to finance export and import activities although firms can perform arbitrage between domestic and foreign financial markets the distortions in asset markets are not fully arbitraged away but instead are transmitted to domestic goods markets the dynamics and steady state responses to a variety of shocks are crucially affected by capital controls even in the presence of capital controls the volatility of domestic interest rates can be substantial

foreign exchange controls and liquidity abstract this paper analyzes the liquidity effects generated by foreign exchange controls in a two country two good two currency cash in advance world economy taxes on the purchases of foreign currency induce redistribution of liquidity in international financial markets which results in co movements of macroeconomic aggregates in the two economies fluctuations in exchange rates and interest rates and changes in welfare of economic agents of each country as the cash in advance constraints generate distortions in the world economy there will be a welfare improvement if these controls relax the liquidity constraints

immigration and pension benefits in the host country this paper examines the role that low skilled immigration plays in determining pension benefits of the host population with an overlapping generations model which allows identifying which groups of native population are in favour or against immigration we find that despite immigrants having low average productivity an open borders policy would be implemented since most of current domestic cohorts gain from immigration only younger workers might be against immigration since they will coincide with immigrants in their retirement periods moreover we show how a larger immigrant quota would increase the probability of a pareto improvement for the current domestic population