Dissertation

Table 2.7: Calibrated baseline equilibria under different values of leisure share in total time endowment.

l_W = 0.575 l_W = 0.6458 l_W = 0.6964 Discount rate (ρ) 0.012 0.014 0.016 IEIS (σ) 3 3.1 3.2 Share of consumption in period utility (η) 0.434 0.372 0.332 Optimal (actual) retirement age 64.72 64.2 64.4 Capital-output ratio 2.493 2.506 2.495 Consumption-income ratio 0.751 0.749 0.751 Rate of return 0.066 0.0653 0.0659 Accidental bequest 0.0148 0.0118 0.01

Table 2.8: Values of the population aging parameters under different values of leisure share in total time endowment.

l_W = 0.575 l_W = 0.6458 γ 0.0001 0.0001
µ 1.554 1.553 Actual life expectancy 78.72 78.7 Decline in projected benefits 32.49% 32.49%

conveniently in the range used in the larger macro-calibration literature.

The values of the population aging parameters γ and µ for which, holding household

behavior, factor prices and the social security tax rate fixed at the baseline, the model

predicts a 33% decline in the projected retirement benefits under l_W = 0.575 and 0.6458

are reported in Table 2.8. Note that the table also reports the actual life expectancies under these parameter values.⁹ As before, the actual life expectancies of the model households

with these γ- and µ-values are in reasonable agreement with the SSA’s projections for the

year 2075. Also, with these values, a social security tax rate of θ = 15.7% restores the

post-population aging retirement benefits to the respective baseline levels when household

behavior and factor prices are held fixed.

In Table 2.9, I report the percentage decline in the projected retirement benefits in new

stationary competitive equilibria where both household consumption-saving and retirement,

as well as the factor prices respond to the demographic change (Case 4). Similar to the

⁹The population growth rate is set to n = 0.47% under both l_W = 0.575 and 0.6458.

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