Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/172225 
Year of Publication: 
2016
Series/Report no.: 
Upjohn Institute Working Paper No. 16-263
Publisher: 
W.E. Upjohn Institute for Employment Research, Kalamazoo, MI
Abstract: 
I examine if the positive correlation between wealth and survivorship has any implications for the progressivity of Social Security's current benefit-earnings rule. Using a general-equilibrium macroeconomic model calibrated to the U.S. economy, I show that the optimal benefit-earnings link for Social Security is largely insensitive to wealth-dependent mortality risk. This is because while a more progressive benefit-earnings rule provides increased insurance for households with relatively unfavorable earnings histories, and therefore lower savings and survivorship, their relatively high mortality risk heavily discounts the utility from old-age consumption. I find that these two effects roughly offset each other, yielding nearly identical optimal benefit-earnings rules both with and without differential mortality.
Subjects: 
differential mortality
Social Security
mortality risk
labor income risk
incomplete markets
social insurance
general equilibrium
JEL: 
E21
E62
H55
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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