Papers by Laurence Kotlikoff
RePEc: Research Papers in Economics, 1983
Old age income security is one of society's most pressing concerns. A decline in family support o... more Old age income security is one of society's most pressing concerns. A decline in family support of the aged, major increases in the length of retirement, and social security's long-term financial difficulty are all reasons for the growing anxiety. Consideration of current and past socioeconomic data provides a solid basis for this anxiety. Between 1950 and 1970 the fraction of the aged living with their children declined from 31 to 9 percent.' Today fewer than 3 percent of elderly households receive income from their children.z These contributions represent less than 1 percent of the income of the e l d e r l ~. ~ Life expectancy for males at age 25 is 46.9 additional years, up from 44.6 years in 1 950.4 Despite this increase, the average number of years worked by 25-year-old males has declined by 3.13 years.5 Together, these changes have almost doubled the expected duration of retirement and other nonworking periods for males from 5.93 years to 11.47 years. The ratio of nonworking to working years for males is now .32, more than twice the 1950 value. For females, growth in the expected work span, associated with dramatic postwar increases in labor force participation, has exceeded growth in the expected life span by 3.26 years. However, if one measures female work years on a male-equivalent earnings basis, the average young adult's expected nonworking period has increased by 3.60 years.6According to this measure, 25-year-olds can now expect to spend 1.2 years out of the work force for every year they spend in the work force.' Difficulties in financing an extended retirement without major family support have been eased considerably by sizable increases in real social security benefits. These benefits now represent the major source of income for 54 percent of the aged.8 However, the continued reliance on social security benefits as the primary source of old age income support is becoming increasingly unlikely. Demographic changes continue to place the Social Security System in a long-term financial crisis. Changes in fertility rates are expected to lower the ratio of social security contributors to beneficiaries from the current value of 3.2 to 1.5 by the year 2040.9The 1983 social security legislation notwithstanding, unless additional measures are enacted shortly, social security tax rates, including health insurance tax rates, could rise as high as 25 percent by the early part of the next century to meet projected benefit payments.lo The rapid growth of private, state, and local pensions in the 1950% 1960s, and 1970s represents a natural response to changes in family support of the elderly, an expansion of the retirement period, and uncertainty concerning the amount of retirement income one can expect from social security. Special tax incentives, a recognition of the advantages of group insurance policies, and the use of fringe benefits to avoid periodic government wage controls are important additional explanations of pension growth. The American pension system is, however, more than simply the inevitable product of changing social, demographic, and economic conditions. Pensions themselves are playing an increasingly important role in shaping social conditions and altering economic behavior. Pensions and the Economics of Aging 1 1.3 The Emerging Role of Pensions in the American Economy: Postwar Patterns of Growth Private, state, and local pensions now cover over 45.28 percent of the U.S. labor force. In 1950 the figure was 19.93 percent. Coverage of private wage and salary workers more
RePEc: Research Papers in Economics, 1983
A labarna 9 1 . 6 7 4 A l a s k a 3 9 , 3 5 9 Ar 1 Zona i 1 9 . 5 0 6 Arkansas 3 5 . 9 1 3 C a 1 ... more A labarna 9 1 . 6 7 4 A l a s k a 3 9 , 3 5 9 Ar 1 Zona i 1 9 . 5 0 6 Arkansas 3 5 . 9 1 3 C a 1 , f o r n i a 9 3 1 , 8 7 9 C o l o r a d o 1 2 4 . 3 0 3 C o n n e c t i c u t 8 2 . 0 5 2 Oe l a w a r e 10.85; D i s t r i c t o f C o l u m b i a ' NA F l o r ~d a 4 1 , 5 9 5 Georg 1 a
RePEc: Research Papers in Economics, 1983
Source. U . S . Bureau o f the Census. "Finances Of Employee Retirement Systems of State and Loca... more Source. U . S . Bureau o f the Census. "Finances Of Employee Retirement Systems of State and Local Governments" NA -Not Available I , Large local plans are local government plans with 500 or more Participants. "Participants" refers here to active participants 2 Estimate based on available data only.
RePEc: Research Papers in Economics, 1983
This volume presents data from the following sources: machine readable data files prepared by age... more This volume presents data from the following sources: machine readable data files prepared by agencies of the U.S. government, data collected by the National Bureau of Economic Research under the direction of the authors in the course of preparing this book, data collected by private nonprofit research institutions, data provided by private sector firms involved in pension fund management and pension fund counseling, and data published in U.S. government reports. A description of each of these data sources is presented here. The following chapters describe particular aspects of the data in more detail; in addition, they indicate the statistical procedures used to analyze these data. The U.S. government data files used in this study are listed and described below; also listed are abbreviated titles that reference these data sources throughout the book.
RePEc: Research Papers in Economics, 1983
Chapter One 1 The 1950 Census reports the percent of elderly parents (age 65 years and over) livi... more Chapter One 1 The 1950 Census reports the percent of elderly parents (age 65 years and over) living with their sons. The 1960 Census details both the percent of elderly parents living with their sons and the percent of elderly parents living with their daughters. The ratio of parents living with sons to parents living with daughters in 1960 was applied to the 1950 information to estimate the ratio of elderly living with either sons or daughters in 1950. Bureau of the Census,
RePEc: Research Papers in Economics, 1983
Source' NBER-DDL EBSI File 11977) 1. See note 1, table 4.1.3.
Industrial and Labor Relations Review, Apr 1, 1985
D z t n b u r y . C T Danvers Town. MA D a n v l l l e . W A D a u p h i n C , PA' De K a l b C ,... more D z t n b u r y . C T Danvers Town. MA D a n v l l l e . W A D a u p h i n C , PA' De K a l b C , GA D e a r b o r n . M I D e l a w a r e C , PA D e n v e r School D i s t r i c t . CO Denve-School D ~s t r ~c t . CO D e n v e r . CO
CORE Metadata, citation and similar papers at core.ac.uk Provided by Research Papers in Economics... more CORE Metadata, citation and similar papers at core.ac.uk Provided by Research Papers in Economics 271 769, 2 4 1 or More Members Other Local Systems With Fewer 4.616 317.523 than 500 Members Sources F r a n k Arnold.-ation o f State-Administered Public Emoloy.ee Pension System L i a b l l~t i e s. NEER CLLPS (1 9 7 8). SRI International-Millrman and Roberts Survey o f Small Local Pension Plans (1 9 7 8). U S Department o f Commerce. Bureau o f the Census. Finances o f State and L o c a l Employee Retrrement Systems,.
This paper compares the value of one dollar of an asset held in a tax-deferred account with one d... more This paper compares the value of one dollar of an asset held in a tax-deferred account with one dollar of a similar asset held in a taxable account from the standpoint of providing future retirement income. Taxes that are due when assets are withdrawn from some retirement saving plans can make a dollar held inside a retirement account less valuable than a dollar held in a similar asset outside these accounts, particularly for those who are considering withdrawing assets from the tax-deferred accounts in the near future. This effect is more than offset, however, particularly for younger workers, by the benefits of many years of asset growth at pre-tax rates of return. This paper calibrates the value of the tax burden, and the benefit of compound growth, for assets held in retirement accounts, and describes the differences in relative valuation for households of different ages.
Forschungsgemeinschaft, and the Universitatsbund Wuerzburg is gratefully acknowledged. The views ... more Forschungsgemeinschaft, and the Universitatsbund Wuerzburg is gratefully acknowledged. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau
JEL No. G0,H0 Do regular 401(k) and IRA accounts offer greater tax benefits than Roth 401(k)s and... more JEL No. G0,H0 Do regular 401(k) and IRA accounts offer greater tax benefits than Roth 401(k)s and Roth IRAs? This is a tough question. Regular 401(k)s and IRAs save taxes in the short term; Roth accounts save taxes in the long term. Regular 401(k)s and IRAs are vulnerable to future income tax hikes, but may benefit from a future switch to consumption taxation if the switch exempts withdrawals from income taxation. Roth accounts are exempt from future income tax hikes, but are exposed to future consumption taxation. For any given assumption about future tax policy, assessing the relative merits of the two types of saving vehicles requires very accurate calculations of taxes in each future year-- calculations that incorporate not just standard federal income tax provisions, but also the Savers Credit, the taxation of Social Security benefits, the Alternative Minimum Tax, and state income taxation. This paper uses ESPlanner (Economic Security Planner)-- a financial planning software pr...
Each of us must decide how to build and invest our savings. People need to ensure that they have ... more Each of us must decide how to build and invest our savings. People need to ensure that they have enough income and assets to maintain their living standard at a desired level through time. Traditional financial planning and portfolio management tools tend to focus on the tradeoff between expected returns and risk at a point in time. While these traditional tools provide important investing insights, we demonstrate that a more holistic life-cycle financial planning framework can help form better spending, saving and investment decisions and reduce living-standard risk through time. Investing and spending are not independent decisions. Spending too aggressively can be as risky, if not far more risky as investing aggressively in determining one’s future living standard. Our focus on living standard risk helps to highlight what we believe should be the household’s ultimate concern – namely, their ability to spend at their desired level in retirement. In this context, the paper also show...
Concern with intergenerational justice has long been a focus of economics. This essay considers t... more Concern with intergenerational justice has long been a focus of economics. This essay considers the effort, over the last three decades, to quantify generational fiscal burdens using label-free fiscal gap and generational accounting. It also points out that government debt -- the conventional metric for assessing generational fiscal justice,– has no grounding in economic theory. Instead, official debt is the result of economically arbitrary government labelling decisions: whether to call receipts “taxes” rather than “borrowing” and whether to call payments “transfer payments” rather than “debt service”. Via their choice of words, governments decide which obligations to put on, and which to keep off, the books. The essay also looks to the future of generational fiscal-justice analysis. Rapid computational advances are permitting economists to understand not just direct government intergenerational redistribution, but also how such policies impact the economy that future generations w...
SSRN Electronic Journal, 2018
The US government has spent decades taxing current generations while also writing them huge IOUs ... more The US government has spent decades taxing current generations while also writing them huge IOUs for future benefits. This paper models the effect on everyday Americans of closing the true $210 trillion fiscal gap with an immediate and permanent 57 percent increase in all federal taxes or with a delayed increase of 69 percent. We examine the impact either method of smoothly closing the fiscal gap would have on five stylized households in three different cohorts. Raising the federal tax rate on all households, at all age and resource levels, increases each family's lifetime tax rate and decreases lifetime spending. The results show that delaying the tax increase lowers the burden on those now alive, particularly the elderly. Meanwhile, the burden on those left to pick up the tab grows larger with each passing year of congressional and presidential inaction.
National Tax Journal, 2019
In this paper, we evaluate the effects of a reduction in Social Security's Old-Age and Survivors ... more 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.
Acta Oeconomica, 2018
Most economists differ not on the causes of the Great Recession, but on their relative importance... more Most economists differ not on the causes of the Great Recession, but on their relative importance. They agree, however, that the core problem is human, not market failure. Their widely held assessment helps explain why the Dodd-Frank banking “reform” says so much and does so little. This study re-tries the usual suspects and finds none guilty. Instead, it points to multiple equilibria in banking and the overall economy. Whether it is Cooke and Company in 1873 or Lehman Brothers in 2008, leverage and opacity are the wicked brew that stokes bank runs. And bank runs prompt employer runs – laying off your employees (other firms’ customers) for fear that others are laying off their employees (your customers). The answer is fundamental, not cosmetic banking reform that fixes banking and the economy for good. The answer is replacing leveraged, trust-me banking with fully transparent, 100 percent equity-financed mutual fund banking. This reform, called Limited Purpose Banking, handles all a...
Politique américaine, 2005
Distribution électronique Cairn.info pour L'Harmattan. © L'Harmattan. Tous droits réservés pour t... more Distribution électronique Cairn.info pour L'Harmattan. © L'Harmattan. Tous droits réservés pour tous pays. La reproduction ou représentation de cet article, notamment par photocopie, n'est autorisée que dans les limites des conditions générales d'utilisation du site ou, le cas échéant, des conditions générales de la licence souscrite par votre établissement. Toute autre reproduction ou représentation, en tout ou partie, sous quelque forme et de quelque manière que ce soit, est interdite sauf accord préalable et écrit de l'éditeur, en dehors des cas prévus par la législation en vigueur en France. Il est précisé que son stockage dans une base de données est également interdit.
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Papers by Laurence Kotlikoff