Macroeconomic Effects of Social Security Totalization Agreements

MRDRC WP 2019-407

72 Pages Posted: 10 Aug 2021

See all articles by María Prados

María Prados

University of Southern California

Erik Meijer

University of Southern California; RAND Corporation

Francisco Pérez‐Arce

University of Southern California

Date Written: September 2019

Abstract

The United States has signed international social security totalization agreements with 30 countries. For persons working in a foreign country during part of their careers, these agreements reduce double taxation on social security burdens and reduce the risk of not qualifying for social security benefits. In this report, we consider the potential of international social security totalization agreements to affect macroeconomic outcomes. We find that these agreements are associated with higher levels of foreign direct investment. The theoretical framework indicates that these treaties can affect firms’ decisions to relocate their activities across borders, but the magnitude and direction of this effect depends on the characteristics of the countries involved. The effects of these agreements are larger when the share of foreign-controlled production is smaller in the host country.

Keywords: Totalization agreements, international agreements, foreign direct investment, international mobility, social security

Suggested Citation

Prados, Maria and Meijer, Erik and Pérez‐Arce, Francisco, Macroeconomic Effects of Social Security Totalization Agreements (September 2019). MRDRC WP 2019-407, Available at SSRN: https://ssrn.com/abstract=3885751 or http://dx.doi.org/10.2139/ssrn.3885751

Maria Prados (Contact Author)

University of Southern California ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

HOME PAGE: http://dornsife.usc.edu/mprados/

Erik Meijer

University of Southern California ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Francisco Pérez‐Arce

University of Southern California

2250 Alcazar Street
Los Angeles, CA 90089
United States

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