The effect of the social security on aggregate effective labor supply: the role of endogenous human capital and of selection effects
Year: 2024
Type: article
Abstract: We quantify the importance of endogenous human capital and of selection effects for counterfactual analysis of social security (SS) reforms. The literature typically performs these analyses by using structural models featuring exogenous productivity profiles. However, this approach faces two issues: (i) the estimation of productivity is subject to selection bias, and (ii) productivity is endogenous to the SS reforms. In this paper, we estimate a quantitative overlapping generations model featuring endogenous human capital accumulation using US data. First, we eliminate the SS and find a large positive effect on aggregate effective labor supply ( ${+}10.31\%$ ). Next, we build variants of this model to quantify the two issues (i) and (ii). We find that the endogeneity issue (ii) is quantitatively more important than the selection bias issue (i).
Source: Macroeconomic Dynamics
Author: Laurent Brembilla
Institutions: Le Mans Université, Laboratoire de recherche en Économie
Language: English
Subfield: Demography
Field: Social Sciences
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W4403400974