Differential mortality and the progressivity of social security

• 成果类型: Article
• 署名作者: Bagchi, Shantanu
• 署名单位: University System of Maryland; Towson University
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2019.07.003
• 发表日期: 2019
• 关键词: Differential mortality; Social Security; mortality risk; labor income risk; incomplete markets; social insurance

摘要

There is a well-established negative correlation between earnings and mortality risk. Using a calibrated general-equilibrium macroeconomic model, this paper examines how this correlation interacts with the welfare implications of Social Security's benefit-earnings rule. My primary findings suggest that the welfare ranking of alternative benefit-earnings rules is somewhat sensitive to differential mortality. Due to their relatively high mortality risk, households with unfavorable earnings histories heavily discount the expected utility from old-age consumption, and therefore do not put much weight on better work-retirement consumption smoothing. Because of this reason, Social Security's benefit-earnings rule warrants less redistribution in the presence of differential mortality, compared to when mortality risk is uncorrelated to earnings. I find that this result continues to hold when household-level labor supply distortions are ignored, and also when an alternative maximin welfare criterion is considered, but not when accidental bequests from the deceased are redistributed to the survivors. (C) 2019 Elsevier B.V. All rights reserved.