The destabilizing effects of the social norm to work under a social security system

We study employment dynamics in an OLG model with unemployment benefits financed by taxing wages, and with a defined contribution plan. The novelty with respect to recent studies of the effects of social security in this context is that we introduce a social norm to work, shaping the worker’s partic...

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Bibliographic Details
Published in:	Mathematical social sciences Vol. 76; pp. 64 - 72
Main Authors:	Dos Santos Ferreira, Rodolphe, Lloyd-Braga, Teresa, Modesto, Leonor
Format:	Journal Article
Language:	English
Published:	Elsevier B.V 01-07-2015 Elsevier
Subjects:	Economics and Finance Humanities and Social Sciences
Online Access:	Get full text
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Summary:	We study employment dynamics in an OLG model with unemployment benefits financed by taxing wages, and with a defined contribution plan. The novelty with respect to recent studies of the effects of social security in this context is that we introduce a social norm to work, shaping the worker’s participation decision, and hence affecting the reservation wage. We find that a strong social norm to work destabilizes conventional wisdom by reversing the negative effects of social security on employment, and destabilizes the economy by facilitating the emergence of endogenous fluctuations.
ISSN:	0165-4896 1879-3118
DOI:	10.1016/j.mathsocsci.2015.04.004