Labor supply responses to marginal Social Security benefits: Evidence from discontinuities

A key question for Social Security reform is whether workers respond to the link on the margin between the Social Security taxes they pay and the Social Security benefits they will receive. We estimate the effects of the marginal Social Security benefits that accrue with additional earnings on three measures of labor supply: retirement age, hours, and labor earnings. We develop a new approach to identifying these incentive effects by exploiting five provisions in the Social Security benefit rules that generate discontinuities in marginal benefits or non-linearities in marginal benefits that converge to discontinuities as uncertainty about the future is resolved. We find that individuals approaching retirement (age 52 and older) respond to the Social Security tax-benefit link on the extensive margin of their labor supply decisions: we estimate that a 10% increase in the net-of-tax share reduces the two-year retirement hazard by a statistically significant 2.0 percentage points from a base rate of 15%. The evidence with regard to labor supply responses on the intensive margin is more mixed: we estimate that the elasticity of hours with respect to the net-of-tax share is 0.42 and statistically significant, but we do not find a statistically significant earnings elasticity. Though we lack statistical power to estimate results within subsamples precisely, the retirement response is driven mostly by the female subsample, while the hours response comes from the male subsample.     

Measuring the immeasurable — A survey of sustainability indices

Sustainability indices for countries provide a one-dimensional metric to valuate country-specific information on the three dimensions of sustainable development: economic, environmental, and social conditions. At the policy level, they suggest an unambiguous yardstick against which a country's development can be measured and even a cross-country comparison can be performed. This article reviews the explanatory power of various sustainability indices applied in policy practice. We show that these indices fail to fulfill fundamental scientific requirements making them rather useless if not misleading with respect to policy advice.     

Pirsig's ‘Zen and the Art of Motorcycle Maintenance’: Quality, reason and binary opposites

Robert Pirsig's celebrated novel has lost little of its impact after 30 plus years, and still speaks to us in the West and our highly technological society. None of the issues raised regarding our relation with technology have changed. As fits the schizophrenic pattern of the book, this article is arbitrarily divided into two disparate sections: the first covers some of the sources for the book and the range of critical views on the book. The second, a more speculative conclusion, drawing on a contradiction in Pirsig's text, looks forward to the books continuing relevance as we see the promise of a new dawn for computers: quantum computing. I am unsure of how to equate the forceful rhetoric against dualism, with the facile mystical acceptance of the Buddha residing in the circuits of a digital computer. This fracture in Pirsig's work becomes more visible when he talks of the Japanese term ‘mu’, meaning ‘no thing’. Binary computation is challenged by alternative logics to binary logic. I examine these issues along with the current definitions of Pirsig's quality. A future ‘definition’ of Pirsig's Quality could be the undecided state of a quantum computer (or quantum processes in the mind).     

Bankruptcy and firm finance

This paper analyzes how an enforcement mechanism that resembles a court affects firm finance. The court is described by two parameters that correspond to enforcement costs and the amount of creditor/debtor protection. We provide a theoretical and quantitative characterization of the effect of these enforcement parameters on the contract loan rate, the default probability and welfare. We analyze agents’ incentive to default and pursue bankruptcy and show that when the constraints that govern these decisions bind, the enforcement parameters can have a sharply non-linear effect on finance. We also compute the welfare losses of “poor institutions” and show that they are non-trivial. The results provide guidance on when models which abstract from enforcement provide good approximations and when they do not.