Browsing by Subject "Social Security"

Now showing 1 - 4 of 4
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    Essays on Household Finance and Health Economics
    (2024-04) Ascarza Mendoza, Diego
    This dissertation consists of three chapters. The first chapter studies why two out of three Americans claim Social Security benefits before reaching their Full Retirement Age and why even sufficiently rich people often claim early. I resolve this puzzling phenomenon by extending a standard incomplete markets life-cycle model to incorporate health dynamics and bequest motives. Relative to the existing literature, health plays a broader role, affecting medical expenses and mortality and directly the marginal utility of consumption. This role of health is disciplined using microdata on consumption, assets, income, and health from the Health and Retirement Study (HRS) and the Consumption and Activities Mail Survey (CAMS). The calibrated model successfully replicates the fraction of early claimers. Counterfactual exercises show that health-dependent preferences and bequest motives are crucial for this result. The model's success is explained by a novel channel that comes from the interaction between the negative effect of worsening health on the marginal utility of consumption, the downward health trend because of aging, and bequest motives. These two elements reduce the gains from delaying by 1) making individuals more impatient and 2) increasing the strength of bequest motives relative to future consumption. The second chapter is joint work with Christian Velasquez and Walter Ruelas-Huanca. This chapter explores the dynamics of mental health over the life cycle and assesses how sensible it is to approximate health by only considering physical health. Using data from the Panel Study of Income Dynamics (PSID) and approximating mental health with the presence of depression symptoms, we document seven facts about the evolution of mental health and contrast them with physical health. The results show two striking differences between mental health and physical health. First, while physical health consistently deteriorates with age, depression incidence follows a U-shape. Second, the likelihood of full recovery from physical health deficits decreases with age and is lower than the one for mental health, which exhibits a flat pattern. Finally, we propose and estimate a parsimonious statistical model for mental health that replicates these facts and can be easily incorporated into life cycle models. The third chapter is joint work with Tomas Rose and James Schmitz. This chapter studies the welfare implications of granting access to a standard mortgage-type credit market for financing affordable, factory-built homes. First, we briefly describe the legal regulations that have allegedly precluded low- and middle-income households in the US from accessing regular mortgage credit lines to finance the purchase of factory-built homes. We further document the current status of the credit market in the manufactured homes segment and highlight the predominance of loans featuring higher interest rates, shorter maturity, and absence of tax deductions (since some of these loans do not qualify legally as mortgages). We build a simple, dynamic, life-cycle model of housing decisions to quantify the welfare gains from changing these regulations. Using data from IPUMS (US Census Bureau), the PSID, and several other available sources, we calibrate our model to match the current home-ownership distribution at the bottom half of the US income distribution. Even at our most conservative exercise, in which we only allow for tax deductions at the factory-built homes credit segment (without modifying either the interest rate or the time to maturity), we find significant welfare gains that are equivalent to, on average, a permanent real income transfer of 6%, or to a present discounted life-time real income transfer of 94%.
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    Essays on Macroeconomics
    (2022-06) YU, ZHIXIU
    This dissertation consists of three chapters studying three important macroeconomic questions. The first chapter studies conditions under which cryptocurrency is valued and under which it coexists with fiat money, using search-theoretic models. A cryptocurrency economy is one in which private agents’ decisions determine the stock of money and in which the marginal cost of producing money is increasing in the existing nominal stock. I show that the inflation rate must be zero in a stationary monetary equilibrium. This result is in sharp contrast to models with fiat money in which the stock of money is exogenously given. In fiat money economies, the inflation rate is determined by the rate of growth of the money stock. My result is also in sharp contrast with other types of private money economies, in which the inflation rate must necessarily be different from zero. In such private money economies, the cost of producing additional money does not depend on the existing nominal stock. Moreover, I show that cryptocurrency and fiat money can circulate at the same time and that the rates of return on these two assets may not be the same. Competition with cryptocurrency restricts the government’s ability to over-issue fiat money and thereby might improve on pure fiat money equilibria without government commitment. The second chapter documents the labor supply trends of older men in the United States and changes in Social Security rules that might be the important factors leading to the rise in the labor supply. The labor supply of men over age 60 has been rising over the past several decades, along both extensive and intensive margins. This trend in older men’s labor is particularly remarkable given that other age groups, such as younger men aged 21-55, exhibited a significant decline in work hours during the same period. In this chapter, I focus on two cohorts of American men: those born in the 1930s and 1950s. I show that the 1950s cohort, relative to the 1930s cohort, supplied more labor from age 60 to age 69, in terms of both labor participation rates and hours worked by workers. For instance, on average, participation rates at ages 60-69 for the 1950s cohort are 9.6 percentage points higher than those for the 1930s cohort, and hours worked by workers increased by 11.5% for the same age group between the two cohorts. Moreover, comparing labor supply behaviors by health status across cohorts over the life cycle, I find a new fact that these increases in participation rates and hours per worker across cohorts are mainly driven by people who were in good health. Further, the labor supply behaviors across cohorts are not significantly different by educational and occupational groups. In addition, compared to the older cohort, the younger cohort faced different Social Security rules: the NRA was postponed from age 65 to age 66; the RET was eliminated for individuals at the NRA or older; and the DRC was raised from around 4.5% to 8%. The third chapter uses a rich structural model to evaluate the impact of Social Security rules on the work decisions for American households. The labor supply of older men increased from the 1930s to the 1950s cohort. This chapter explores the role of three Social Security changes in determining these differences: a delayed normal retirement age, increased delayed retirement credits, and a change in the earnings test that was eliminated beyond the retirement age, and evaluates the effects of several proposed reforms to the Social Security program on individuals’ behaviors. I develop and estimate a rich dynamic life-cycle model of labor supply, savings, and Social Security application for healthy and unhealthy people using the Method of Simulated Moments for the 1930s birth cohort. The model captures the key structure of the Social Security retirement benefits, pension systems, and disability insurance, while taking into account uncertainties in health and disability, survival rates, wages, and medical expenditures. My model matches well the observed life-cycle profiles of employment, hours worked by workers, and savings for healthy and unhealthy people from the Panel Study of Income Dynamics data, and generates labor supply elasticities that rise with age and are smaller for healthy workers. It shows that the joint effects of the three changes in Social Security rules account for over 73% of the observed rises in labor force participation and hours per worker by the 1950s cohort. Of the three changed rules, the change in the earnings test contributes the most to the labor dynamics of older men. Additional policy experiments suggest that postponing the retirement age has little effect on older workers, while eliminating the earnings test and reducing retirement benefits by 23% would further increase older-age participation by 3.4 and 5.1 percent, respectively.
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    Essays on Social Security Reform: A Study of the 1981 and 2008 Chilean Reforms
    (2018-07) Schlehuber, Kathleen
    This thesis studies the welfare impact of Social Security reform through case studies of reforms done in Chile in 1981 and 2008. Chapter 2 presents the literature related to the topic. Chapter 3 uses Chilean micro-data in order to measure how workers substitute between formal work, informal work, and home production. These estimates will be used in subsequent chapters. Chapter 4 studies the 1981 reform in which Chile moved from a pay-as-you-go Social Security system to a program of private, individual retirement accounts. Chapter 5 studies a secondary reform from 2008 which amended the minimum pension available to those workers who do not save sufficiently for their own retirement.
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    Overcoming the Past: A Project for Improving the Economic Security of Older Women
    (2012-09-14) Battiste, Barbara
    America’s older women are in economic crisis; over 60 percent of women age 65 or older have insufficient income to cover basic expenses. This paper explores the reasons for this dire situation and proposes a solution: the design of a pilot project to give older women in-demand job skills and to overcome age bias in the hiring process. It is shown that jobs are a preferable strategy to public subsidies for helping women achieve economic security.