JEFF DOMINITZ, Carnegie Mellon University - H. John Heinz III School of Public Policy and Management, RAND Corporation
Email: DOMINITZ@ANDREW.CMU.EDU
ANGELA HUNG, Carnegie Mellon University, RAND Corporation
Email: ahung@andrew.cmu.edu
ARTHUR VAN SOEST, RAND Corporation, Institute for the Study of Labor (IZA), Tilburg University
Email: VanSoest@rand.org

We report on our preliminary findings from an innovative module of survey questions in the RAND American Life Panel designed to measure willingness to delay take-up of Social Security benefits. Among respondents who expect to stop working full time prior to turning age 62, over 60 percent report that they expect to start claiming Social Security benefits after they turn 63 - that is, they expect to delay claiming. In contrast, among those who expect to stop full-time work sometime from age 62 to age 70, only about one-quarter expect to delay claiming beyond the retirement age. Another main finding arises from reported probabilities of delayed claiming in hypothetical choice scenarios. These probabilities tend to be quite high relative to previous findings on delayed claiming outcomes. This result is particularly striking for those who are presented with information about the so-called "break-even age" for delayed claiming rather than information about the total amount of benefits that must be foregone during the one year delay.

ADELINE DELAVANDE, New University of Lisbon - Faculdade de Economia
Email: a-delavande@fe.unl.pt
ROBERT J. WILLIS, University of Michigan at Ann Arbor - Department of Economics, National Bureau of Economic Research (NBER)
Email: rjwillis@umich.edu

This study analyzes the role of individual's and spouse's survival expectations and knowledge about Social Security rules on the expected Social Security claiming age, taking into account the various incentives single and married individuals face. There is substantial heterogeneity in the level of knowledge about SS rules according to demographic characteristics. We find that single men and women who expect to be longlived plan on delaying Social Security claiming. When we allow for differential effects of survival on knowledge about Social Security rules, subjective survivals matter only for single women who are knowledgeable. For single men, knowledge is not so important in their decisions. The claiming decision of married individuals is more complicated, because they are entitled to spouse's and survivor's benefits. Consistent with the incentives provided by Social Security rules, we find that married men base their expected claiming age on their spouse's survival expectations but not on their own survival. For married women, both own and spouse's subjective survivals positively influence the timing of claiming. Knowledge about Social Security rules affects the expected claiming age of both married men and women.

ELIZABETH M. CAUCUTT, University of Western Ontario - Department of Economics
Email: ecaucutt@uwo.ca
THOMAS F. COOLEY, Leonard N. Stern School of Business - Department of Economics, National Bureau of Economic Research (NBER)
Email: tcooley@stern.nyu.edu
NEZIH GUNER, Pennsylvania State University, College of the Liberal Arts, Department of Economics
Email: nguner@psu.edu

During the period from 1880 to 1950 publicly managed retirement security programs became an important part of the social fabric in most advanced economies. In this paper we study the social, demographic and economic origins of social security. We describe a model economy in which demographics, technology, and social security are linked together. We study an economy with two locations (sectors), the farm (agricultural) and the city (industrial). The decision to migrate from rural to urban locations is endogenous and linked to productivity differences between the two locations and survival probabilities. Furthermore, the level of social security is determined by majority voting. We show that a calibrated version of this economy is consistent with the historical transformation in the United States. Initially a majority of voters live on the farm and do not want to implement social security. Once a majority of the voters move to the city, the median voter prefers a positive social security tax, and social security emerges.

KAJAL LAHIRI, SUNY at Albany, College of Arts and Sciences, Economics
Email: klahiri@albany.edu
JAE SONG, U.S. Social Security Administration
Email: jae.song@ssa.gov
BERNARD WIXON, Government of the United States of America - Social Security Administration
Email: Bernard.Wixon@ssa.gov

We study Disability Insurance (DI) application behavior in the U.S. using a matched SIPP and administrative data over 1989-1995. Certain state-contingent earnings projections and eligibility probabilities are central to the analysis. We find evidence for a small work disincentive effect of DI that seems to be restricted to a subset of the DI beneficiaries, including low earning groups such as blue collar workers and those subject to economic dislocation. Processing time, Medicare value, unemployment, private health insurance, and health shocks are some of the major factors that affect application propensity. The behavioral response of female workers to various parameters of the DI program is found to be quite different from that of males.

JOHN GEANAKOPLOS, Yale University - Cowles Foundation
Email: john.geanakoplos@yale.edu
STEPHEN P. ZELDES, Columbia Business School, National Bureau of Economic Research (NBER)
Email: spz1@columbia.edu

The heated debate about how to reform Social Security has come to a standstill because the view of most Democrats (that Social Security must be a defined benefits plan similar in spirit to the current system) seems irreconcilable with the proposals supported by many Republicans (to create a defined contribution system of personal accounts holding marketed assets). We describe a system of progressive personal accounts that preserves the core goals of both parties, and that is self-balancing on an ongoing basis. Progressive personal accounts have two critical features: (1) accruals into the personal accounts would be exclusively in a new kind of derivative security (which we call a PAAW for Personal Annuitized Average Wage security) that pays its owner one inflation-corrected dollar during every year of life after his statutory retirement date, multiplied by the economy wide average wage at the retirement date and (2) households would buy their new PAAWs each year with their social security contributions, augmented or reduced by a government match that would add to contributions from households with low lifetime incomes by taking from households with high lifetime incomes. PAAWS define benefits and achieve risk sharing across generations, as Democrats would like, yet can be held in personal accounts with market valuations, as Republicans propose.