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Title: Retirement Savings Accounts and Human Capital Investment

Citation Type: Conference Paper

Publication Year: 2009

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Abstract: This paper studies the role of endogenous human capital accumulation in evaluating tax and SocialSecurity policies. It considers two overlapping generations environments with borrowing constraints:one with exogenous human capital and a second with human capital accumulation through timeinvestment. Baseline environments are calibrated to the U.S. tax and Social Security system. Thispaper analyzes two alternative Social Security systems: (a) voluntary and (b) mandatory retirementsavings accounts. The paper finds that the welfare ranking of these alternatives depends on the endogeneityof human capital investment. Both systems are welfare improving when compared to thebaseline. However, the system with mandatory (voluntary) accounts leads to lower welfare gainsin the endogenous (exogenous) human capital environment. This difference is due to young individuals(i) switching time allocation towards human capital accumulation and (ii) being borrowingconstrained under mandatory savings in the endogenous environment.

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Authors: Dubovyk, Tetyan

Conference Name: CESifo Venice Summer Institute

Publisher Location: Venice, Italy

Data Collections: IPUMS USA

Topics: Aging and Retirement

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