The Joint Labor Supply Decision of Married Couples and the Social Security Pension System

Posted: 16 Nov 2010

Date Written: September 1, 2010

Abstract

The current U.S. Social Security program redistributes resources from high wage workers to low wage workers and from two-earner couples to one-earner couples. The present paper extends a standard general-equilibrium overlapping-generations model with uninsurable wage shocks to analyze the effect of spousal and survivors benefits on the labor supply of married couples. The heterogeneous-agent model calibrated to the 2009 U.S. economy predicts that removing spousal and survivors benefits would increase female market work hours by 4.3-4.9% and total output by 1.1-1.5% in the long run, depending on the government financing assumption. If the increased tax revenue due to higher economic activity after the policy change was redistributed in a lump-sum manner, a phased-in cohort-by-cohort removal of these benefits would make all current and future age cohorts on average better off.

Suggested Citation

Nishiyama, Shinichi, The Joint Labor Supply Decision of Married Couples and the Social Security Pension System (September 1, 2010). Michigan Retirement Research Center Research Paper No. 2010-229, Available at SSRN: https://ssrn.com/abstract=1710067 or http://dx.doi.org/10.2139/ssrn.1710067

Shinichi Nishiyama (Contact Author)

Congressional Budget Office ( email )

Ford House Office Building
2nd & D Streets, SW
Washington, DC 20515-6925
United States

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