Welfare Implications of Uncertain Social Security Reform Public Finance Review, 2020 Abstract: Policy uncertainty is a type of aggregate risk that has important economic and welfare implications. In this article, I develop a simple general equilibrium overlapping generations model in which households are uncertain as to the type and timing of an inevitable Social Security reform. I document how households’ expectations over the path of future policy influences their behavior. I find that the economic and welfare effects of policy uncertainty are highly sensitive to households’ beliefs over the path of future policy.
Macroeconomic Effects of Reducing OASI Benefits: A Comparison of Seven Overlapping-Generations Models joint with Kerk Phillips and discussing authors: Seth G. Benzell, Efraim Berkovich, Robert Carroll, Jason DeBacker, John Diamond, Richard Evans, Jagadeesh Gokhale, Laurence Kotlikoff, Guillermo LaGarda, James Mackie, Rachel Moore, Brandon Pecoraro, Brandon Pizzola, Victor Yifan Ye, and George Zodrow National Tax Journal, 2019
Abstract: In this paper, we evaluate the effects of a reduction in Social Security’s Old-Age and Survivors Insurance (OASI) benefits using seven different quantitative general equilibrium overlapping-generations (OLG) models. We compare the effects of an anticipated one-third reduction in OASI benefits beginning in 2031 on an economy that maintains currently scheduled benefits. We find many of the models generate qualitatively similar results concerning budgetary and macroeconomic aggregates; however, the magnitude of the effects varies owing to the models’ structure and calibration strategies.
Abstract: Along with health, Social Security Disability Insurance (SSDI) evaluates work-limiting disability by considering vocational factors including age, education, and past work experience. SSDI determinations based on these factors have grown three-fold since 1985. We use an unique state-level data-set to estimate how vocational demographics relate to SSDI awards and then assess the contribution of demographic change to SSDI trends. Although workers in their 50s are associated with higher SSDI award rates, secular increases in educational attainment should have offset the impact of population aging on rising SSDI claims, particularly those with Vocational Considerations.
Abstract: In the face of an aging population, the demand for long-term care services is expected to increase in the United States for the next several decades. The Medicaid program is the largest payer of formal long-term care in the United States, and since 1999 there has been a growing effort at the federal level to increase coverage for formal care in the home by granting states more authority over their programs' eligibility rules. However, benefit expansions for the aged population have yet to be widely implemented as state-level policy makers cite concerns over the cost of the programs. In this paper, I calibrate an overlapping-generations model to the U.S. economy and quantify the fiscal and welfare implications of the eligibility rules that govern Medicaid's care programs. I find that the costs associated with expanding home care benefits are partially mitigated by individuals substituting out of institutional care. The substitution is most prevalent among elderly individuals with marginally higher incomes that gain access to Medicaid through a spend-down rule. Finally, expanding home care benefits to the aged population lowers aggregate informal care hours provided by adult children; however, the effect is concentrated among middle income children with parents newly eligible for Medicaid benefits. Lower income children, or those with parents that are ineligible for Medicaid, exhibit higher rates of informal care following a rise in the cost of private-pay home care services.