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on Education |
| By: | Gary V. Engelhardt (Syracuse University); Anil Kumar (Center for Policy Research) |
| Abstract: | This paper examines the potential impact of government matching contributions on personal-account participation in the President's Commission on Strengthening Social Security's Model 3 for Social Security reform. Given the government's choice of four plan-design parameters, the magnitude of the match is determined solely by the differential return personal-account assets receive above the notional return, referred to as the "personal-account premium," akin to the equity premium. The impact of matching on personal-account participation is simulated for older workers (ages 40 to 65) in the first wave of the Health and Retirement Study (HRS) using empirical estimates from a structural model of the impact of employer matching on participation in corporate 401(k) plans. For a personal-account premium of five percentage points, which implies a match rate of 12.5 percent for middle- to lower-income workers, the simulations imply that 53 percent of older workers would participate in voluntary personal accounts. The response of participation to matching is very inelastic; it is very unlikely that participation by older workers would achieve the mid-range assumption by the Commission of 67 percent. There is substantial heterogeneity in participation across subsets of older workers: participation would be the lowest for low-educated, minority, and unmarried older workers. |
| Keywords: | social security, reform, matching |
| JEL: | H55 J14 J15 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:2004-22&r=edu |
| By: | Dan A. Black (Syracuse University); Xiaoli Liang (Syracuse University) |
| Abstract: | In this paper, we explore the effect of local labor market conditions on the labor supply decisions of older workers. We use three different sources of variation: shocks to the US steel industry, shocks to Appalachian coal mining, and shocks to US manufacturing. While each experiment uses different methodology, the three tell a remarkably consistent story: the retirement decisions of Americans over the last thirty-five years have been affected by the performance of local labor markets. First, using variation induced by the decline in the US steel industry, we find that a 10 percent reduction in earnings resulting from the decline of the primary metals industry resulted in a 1.5 percent increase in the participation and expenditures of the Old Age program. Second, using variation in coal prices induced by oil shocks, we find that a 10 percent increase in earnings from the coal industry reduced participation about 0.9 percent and decreases expenditures about 1.2 percent. Finally, looking at variation induced by the concentration of manufacturing employment, we use micro data to examine the age and education levels of those who retired. |
| Keywords: | labor market, retirement |
| JEL: | J14 J26 J45 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:2005-08&r=edu |