Events

Finance Seminar

Author:

• David A. Chapman
  University of Virginia

• Michael F. Gallmeyer
  University of Virginia

• Chunyu (Ben) Yang
  BI Norwegian Business School

We examine the optimal responses of rational, disappointment averse households
subject to exogenous Social Security policy uncertainty. The Social Security contract
studied below captures the key features of the actual policy, and household labor income
is exogenous and calibrated to the recent work in Guvenen, Karahan, Ozkan, and Song
(2016) that uses millions of observations on earnings collected from the Social Security
Administration and the Internal Revenue Service. Our (very preliminary) main findings
are: (i) in the absence of the possibility of a policy change, optimal household rules are
insensitive to social security policy except shortly before retirement; (ii) ??.