Labor Market Search and Optimal Retirement Policy / Joydeep Bhattacharya, Casey B. Mulligan, Robert R. Reed III.

Format:

Book

Author/Creator:

Bhattacharya, Joydeep.

Contributor:

National Bureau of Economic Research.

Mulligan, Casey B.

Reed, Robert R, III.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8591.

NBER working paper series no. w8591

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

A popular view about social security, dating back to its early days of inception, is that it is a means for young, unemployed workers to 'purchase' jobs from older, employed workers. The question we ask is: Can social security, by encouraging retirement and hence creating job vacancies for the young, improve the allocation of workers to jobs in the labor market? Using a standard model of labor market search, we establish that the equilibrium with no policy-induced retirement can be efficient. Even under worst-case parameterizations of our model, we find that public retirement programs pay the elderly substantially more than labor market search theory implies that their jobs are worth. An important effect, ignored by the popular view, is that the creation of a vacant job by a retirement reduces the value of other vacant jobs.

Notes:

Print version record

November 2001.