Rafael Lalive, Arvind Magesan, Stefan Staubli, 12 January 2021

Policymakers have used a variety of tools to preserve the solvency of social security systems. The life-cycle model of behaviour predicts that financial incentives will shape people’s decisions on when to claim their pensions and when to retire but this is debatable. This column examines a reform to women’s pensions in Switzerland to understand how people respond to different policy instruments. Most people do not claim their pension benefits at the age that the standard model of behaviour would predict. Instead, individuals are influenced by the full retirement age (which they consider ‘natural’) and the fear of losing benefits by claiming early.

Jonathan Gruber, Ohto Kanninen, Terhi Ravaska, 22 November 2020

Fiscal sustainability challenges have prompted governments to restructure public pension systems, including the focal retirement ages. This column shows that relabelling ‘early’ and ‘normal’ retirement ages in a 2005 reform in Finland changed people’s retirement rate. Such relabelling allows policymakers to shape retirement behaviour with little fiscal cost. However, there is a marginal increase in regret among those who responded to the change in retirement ages, suggesting a potential source of welfare loss from inducing excess retirement.

Hamish Low, Luigi Pistaferri, 08 April 2020

Disability insurance programmes provide income replacement and medical benefits to workers who face major health shocks impeding their ability to work. The screening error of incorrect acceptance – where individuals who are not disabled are awarded benefits – and moral hazard have been well researched, but scant attention has been paid to incorrect rejection. Using US data, this column shows that the probability of being rejected when disabled varies with a host of observable characteristics. Most strikingly, truly disabled women are 20 percentage points more likely to be incorrectly rejected than observationally equivalent men.

Laurence Kotlikoff, 19 February 2020

The US has spent the entire post-war period running a massive and ever-growing Ponzi scheme that takes from the young and gives to the old. This column discusses how the scheme has been and is being run by expanding take-as-you-go-financed Social Security, Medicare, and Medicaid systems, by running huge official deficits, and by imposing a larger share of taxes on the young and a smaller share on the old. Take as you go, whether done on or off the books, has done precisely as theoretically predicted – reduced the US’s national saving rate from 13% in the 1950s and 1960s to 3% in the last two decades. This underlies, in large part, a commensurate drop in the domestic investment rate, which was also 13% between 1950 and 1969 and is now running at 4%. The textbook predicted consequence? Lower median labour productivity and median real wage growth.

Margherita Borella, Mariacristina De Nardi, Fang Yang, 23 November 2019

In the US, both taxes and social security benefits depend on one’s marital status and tend to discourage the labour supply of the secondary earner. Using information on US cohorts born in 1945 and 1955, this column shows that eliminating marriage-related provisions drastically increases the participation of married women over their entire life cycle and reduces the participation of married men after age 60. If the resulting government surplus were used to lower income taxation, there would be large welfare gains for the vast majority of the population.

Timothy J. Layton, Nicole Maestas, Daniel Prinz, Boris Vabson, 17 October 2019

There is much debate, and nowhere more than in the US, about whether public services such as healthcare should be provided by private companies, which may offer greater efficiencies but which are more susceptible to moral hazard and adverse selection of consumers. This column uses evidence from a provision change in Texas to show that contracting healthcare provision out to private companies increased the level of care patients received, but increased overall costs for the government.

James Poterba, Lawrence H. Summers, 25 September 2019

Martin Feldstein, who passed away in June 2019, was one of the most important applied economists of the last half-century. This column, by two of his students and close colleagues, celebrates his intellectual legacy, outlining his seminal contributions on a wide range of topics in public economics and beyond, his pioneering use of large data sets, and his influential voice in US public policy over many decades. As president of the National Bureau of Economic Research for nearly 30 years, Feldstein advanced the conduct and dissemination of economic research, and helped to create the modern economics profession.

Satoshi Shimizutani, 14 January 2019

Social security reforms in advanced economies may give people incentives to work past retirement age. The column estimates the financial incentives to work or retire at each age for elderly men and women in Japan. There is a correlation between series of social security reforms to reduce generosity and the recent recovery of employment rates for men aged 60-69 and for women aged 55-64.

Edward Wolff, 23 December 2018

Unlike income inequality, wealth inequality along racial lines in the US has received relatively little attention. This column presents new evidence on the changing landscape of relative wealth among whites, blacks, and Hispanics between 1983 and 2016. Using an augmented measure of wealth, it highlights how cuts to social security will disproportionately affect minorities.

Johanna Wallenius, Max Groneck, 01 June 2017

At the individual level, social security is a strong source of redistribution from rich to the poor in the US, due to the concavity of the pension formula. But this column argues that spousal and survivor benefits, which are important sources of retirement income for women, introduce regressive redistributive elements to social security and also provide incentives for even highly educated women to stay at home if they are married to a high earner. A means-tested minimum benefit would simultaneously increase overall labour supply and reduce inequality, compared to the current system.

Timm Boenke, Markus M. Grabka, Carsten Schroeder, Edward Wolff, 10 May 2017

International comparisons of private household wealth place the US among the richest countries, whereas German households appear rather poor. This column argues that as these rankings are based on average household net wealth, they do not tell the whole story. An augmented wealth approach that adds social security wealth to net wealth reduces wealth inequalities in both countries and the wealth gap between the two. 

Don Fullerton, Nirupama Rao, 03 May 2017

In the 2012 US presidential election, Mitt Romney famously asserted that 47% of the population were long-term dependents of the government – ‘takers’, not ‘givers’ to the system. This column examines this claim using long-spanning household-level data. Even though many households find themselves not paying tax or receiving public benefits in at least some years, only a small fraction consistently pay no tax or consistently receive public transfers.

Frank Caliendo, Maria Casanova, Aspen Gorry, Sita Nataraj Slavov, 16 November 2016

Not knowing when you are going to retire can make it hard to plan both savings and consumption in old age. This column examines how much uncertainty people face over their retirement and how costly this is as they attempt to make optimal saving plans. It argues that current structure of the Social Security retirement and disability programmes in the US does not provide much insurance against this uncertainty.

Harun Onder, Pierre Pestieau, 20 May 2014

The world’s population is ageing, due to both increasing longevity and decreasing fertility. This column shows that the net effect of ageing on capital accumulation (and therefore growth) depends on which of these two factors dominates, and also on the structure of the pension system. Under a pension system with defined contributions, a reduction in fertility induces adjustments in savings and working life that unambiguously increase capital per worker.

José González-Páramo, Ángel Melguizo, 06 February 2013

In spite of its policy relevance, academics and policymakers cannot agree on who bears the brunt of a tax on labour. This column uses meta-regression techniques to argue that economic institutions, the tax wedge definition, and the time horizon are crucial in determining who actually pays. Results based on 52 empirical papers suggest that in the long run, workers bear between two thirds of the tax burden in Continental and Anglo-Saxon economies, and nearly 90% in Nordic ones.

Gary Hufbauer, Kati Suominen, 13 October 2010

The global crisis has rocked people’s faith in globalisation. This column introduces a new book arguing that, despite taking a step back, globalisation is one of the most travelled routes the world has known for spreading growth and prosperity. It provides policy recommendations for renovating that road dealing with the WTO, social security, global imbalances, and foreign direct investment.

Naren Prasad, Megan Gerecke, 10 October 2010

Financial crises, such as that of 2008-2009, cause GDP to decline, trade to shrink, unemployment to rise, and social problems to increase. What is the link between financial crises and social security spending? This column examines the trends in social security spending in the aftermath of a financial crisis, advising that now is the time for developing countries to expand their social spending.

Renata Bottazzi, Tullio Jappelli, Mario Padula, 16 September 2009

Pensions reforms are shifting retirement burdens onto private households. How will they respond? This column uses Italian data to show that households better informed about their future entitlements save more for retirement, but private wealth increases considerably less than one-for-one with the social security decreases.

Mariacristina De Nardi, Eric French, John Jones, 14 February 2009

The risks of living long and facing high medical expenses go a long way toward explaining elderly persons’ saving decisions. This column shows that the elderly, especially those with high lifetime incomes, keep large asset holdings to address these health concerns. Such behaviour is particularly strong in the US.

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