TY  - JOUR
AU  - Bhattacharya,Joydeep
AU  - Mulligan,Casey B.
AU  - Reed,Robert R.,III
TI  - Labor Market Search and Optimal Retirement Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8591
PY  - 2001
Y2  - November 2001
UR  - http://www.nber.org/papers/w8591
L1  - http://www.nber.org/papers/w8591.pdf
N1  - Author contact info:
Joydeep Bhattacharya
Dept. of Economics
Iowa State University
Ames, IA 50011
E-Mail: joydeep@iastate.edu

Casey B. Mulligan
University of Chicago
Department of Economics
1126 East 59th Street
Chicago, IL  60637
Tel: 773/702-9017
Fax: 773/702-8490
E-Mail: c-mulligan@uchicago.edu
AB  - A popular view about social security, dating back to its early days of inception, is that it is a means for young, unemployed workers to 'purchase' jobs from older, employed workers. The question we ask is: Can social security, by encouraging retirement and hence creating job vacancies for the young, improve the allocation of workers to jobs in the labor market? Using a standard model of labor market search, we establish that the equilibrium with no policy-induced retirement can be efficient. Even under worst-case parameterizations of our model, we find that public retirement programs pay the elderly substantially more than labor market search theory implies that their jobs are worth.  An important effect, ignored by the popular view, is that the creation of a vacant job by a retirement reduces the value of other vacant jobs.
ER  -