Virginia Sánchez-Marcos

Social Security retirement programs are designed to provide full insurance against longevity risks through a progressive scheme. In line with previous work on earnings and race, we document, using HRS data, 2.5- and 5.5-year life-expectancy gaps by wealth and health at age 56, respectively. Such significant differences in life expectancy reduce the progressivity feature of the program. We examine the welfare costs of ignoring life expectancy conditional on wealth and health at the claiming age in a parsimonious way, by adding a wealth- or health-based correction factor to the current program. We build a rich life-cycle model in which married men decide their savings, labor supply and benefits-claiming age, and are heterogeneous in many dimensions, in particular in their fixed health type. We find that the welfare losses of ignoring differences in life expectancy by wealth and health at the claiming age are equivalent to a permanent consumption fall of 2.22\% and 0.30\%, respectively. Moreover, the effects are very heterogeneous across health types.

Using microdata from the CPS and the HRS, we document changes in labor force participation at older ages in the USA since the mid-1990s. Our main finding is that the over two-decade increase in participation is solely driven by individuals in good health, and does not differ across either educational or occupational groups. This phenomenon may importantly affect the results of social security reforms aiming at raising the mandatory retirement age and may exacerbate the health gap in lifetime earnings. (JEL codes: J22 and I14)

This paper shows how family policies aimed at reconciling the pressures of family and work generate substantial variation in labour market outcomes across developed countries. We use a life-cycle model of female labour supply and savings behaviour, calibrated to the US economy, to assess the effect of introducing to the US a maternity leave policy similar to Scandinavian-type policies. We focus on the impact on gender differences in participation and in wages. We distinguish between the effect of the job protection offered by maternity leave and the effect of income replacement. Job protection leads to substantial increases in participation of mothers with children under 6, but with little long term effects. The effects on wages are minimal, with negative selection effects offsetting the reduced human capital depreciation. Income replacement has a limited impact on participation or wages. JEL codes: J13; J18; J22