Is smoking a fiscal good?

Bagchi, Shantanu; Feigenbaum, James

doi:10.1016/j.red.2013.04.002

Cited by 8 publications

(5 citation statements)

References 38 publications

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“…This is because the shape of the age-dependent component of labor productivity (s) is the single-most important determinant of the shape of the hours profile generated from the model, and the productivity profile estimated from Hansen (1993) peaks relatively early. While it is standard practice in the literature to treat the age-dependent component (s) as observable, there are studies that treat this as an unobservable structural parameter, and calibrate it to match the shape of the hours profile in the data (Bullard and Feigenbaum, 2007;Bagchi and Feigenbaum, 2014). As one would expect, the calibrated productivity profiles in these studies peak significantly later in life (about age 52 or even later), relative to the productivity profile estimated from Hansen (1993), which peaks at age 42.…”

Section: Baseline Resultsmentioning

confidence: 99%

Is the Social Security Crisis Really as Bad as We Think?

Bagchi

2015

Macroecon. Dynam.

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Because they ignore the household-level and macroeconomic adjustments associated with longevity improvements, the actuarial projections of the Social Security Administration overestimate the Social Security crisis. Using a general-equilibrium model with heterogeneous agents and incomplete markets, I show that accounting for these adjustments, a significantly smaller decline in benefits is needed to balance the Social Security budget. Households respond to the longevity improvements by delaying retirement and Social Security benefit collection, working more hours, and by also saving more. In general equilibrium, these effects lead to a natural expansion of Social Security's tax base and generate significant delayed retirement credits, which the actuarial estimates completely overlook.JEL Classifications: E21, H55, J22

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Section: Baseline Resultsmentioning

confidence: 99%

Is the Social Security Crisis Really as Bad as We Think?

Bagchi

2015

Macroecon. Dynam.

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“…One potential strategy to improve the model's fit along this dimension is to treat the age‐dependent component of labor productivity

{\epsilon }_{t}

as an unobservable structural parameter. Treating

{\epsilon }_{t}

as an unobservable parameter would eliminate any selection bias arising from measuring it as residual wages (Bagchi & Feigenbaum, 2014; Bullard & Feigenbaum, 2007).…”

Section: Baseline Steady‐state Equilibriummentioning

confidence: 99%

Means testing and Social Security in the United States

Bagchi

2023

International Studies of Economics

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This paper uses a heterogeneous‐agent overlapping‐generations model to examine the fiscal and distributional consequences of introducing a means test in US Social Security. I find that a means test, that is, conditioning benefit payments on a household's earnings or assets, leads to a higher implicit tax on old‐age resources, but has desirable distributional effects. A 75% cut in the benefits to households with earnings of more than 200% of the median leads to a 2.3% reduction in the overall size of Social Security, but has almost no effect on average dollar benefits. In contrast, a fiscally comparable payroll tax cut leads to an across‐the‐board decline of 2% in the average dollar benefits, despite an increase in capital and labor. A fiscally comparable delay in the benefit eligibility age increases benefits for all, but negatively affects capital and labor. Finally, an asset‐based means test causes a decline of 1% in the average dollar benefits, but has a large negative effect on capital and the accidental bequests left behind by deceased households.

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“…First, I treat the age-dependent component of labor productivity (s) as observable, whereas in reality it is an unobservable structural parameter. Treating (s) as an unobservable parameter could potentially eliminate any selection bias arising from measuring it as residual wages (Bullard and Feigenbaum 2007;Bagchi and Feigenbaum 2014). Second, households in the current model smooth consumption across the work life and retirement (the life-cycle motive), and also across the stochastic realizations of the idiosyncratic productivity shock (the precautionary motive).…”

Section: Baseline Economymentioning

confidence: 99%

Differential mortality and the progressivity of social security

Bagchi

2019

Journal of Public Economics

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I examine if the positive correlation between wealth and survivorship has any implications for the progressivity of Social Security's current benefit-earnings rule. Using a general-equilibrium macroeconomic model calibrated to the U.S. economy, I show that the optimal benefit-earnings link for Social Security is largely insensitive to wealth-dependent mortality risk. This is because while a more progressive benefit-earnings rule provides increased insurance for households with relatively unfavorable earnings histories, and therefore lower savings and survivorship, their relatively high mortality risk heavily discounts the utility from old-age consumption. I find that these two effects roughly offset each other, yielding nearly identical optimal benefit-earnings rules both with and without differential mortality. JEL Classification Codes: E21, E62, H55

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Is smoking a fiscal good?

Cited by 8 publications

References 38 publications

Is the Social Security Crisis Really as Bad as We Think?

Is the Social Security Crisis Really as Bad as We Think?

Means testing and Social Security in the United States

Differential mortality and the progressivity of social security

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