Economics 698s: Social Insurance John Rust, 4115E Tydings Hall Fall 2002 This is an introduction to the economic analysis of Social Insurance. It will not be possible to provide an in depth treatment of all aspects of this complex subject in a single semester. In particular, we will deal only tangentially with a very important aspect of social insurance -- health care. A full treatment of issues connected with public provision of health care requires a separate course. This course will also not be able to provide in depth coverage of the larger literatures on optimal taxation and public income transfer programs such as welfare. In view of current public concern over the world wide demographic transition and its effect on the financial solvency and long run viability of pay as you go Social Security systems, the main focus of this course will be on old age and disability components of social insurance. We will also consider unemployment insurance and workers compensation, especially since they are important ``exit routes'' from the labor force in European countries. After comparing and constrasting the key features of existing social insurance institutions around the world, we will consider the history of social insurance in order to understand the main forces affecting the evolution of these institutions. An important question is the extent to which we can explain some of the idiosyncratic features we observe in different systems throughout the world as a result of nearly optimal adaptations to heterogeneity in local environments (e.g. differences in endowments, technologies, markets, and preferences) versus being a result of a series ``historical accidents'' in a more or less trial and error process of sequential policy ``blunders'' and reforms. We consider the main explanations of why government should be in the ``social insurance business'' in the first place including a) paternalism, b) market failure, and c) redistribution of income. The first motive for governement involvement depends on the extent to which individuals are rational, far-sighted decision makers. So a significant part of the course will be devoted to theoretical and empirical analyses of individual retirement behavior -- particularly with regard to the extent to social insurance institutions affect or ``distort'' labor/leisure and consumption/savings decisions. Assuming individual rationality (and thus temporarily dismissing the paternalist motive for government intervention in social insurnace), we will study theories of ``optimal'' and ``efficient'' social insurance institutions using results from dynamic extensions of the literature on mechanism design. However we will find that this theory is a bit too abstract to say much about the particular details of efficient social insurance insitutions. Instead, more progress is being made via a less systematic approach to policy analysis, using increasingly realistic computational models to evaluate the welfare gaings and losses from alternative schemes for financing and providing social insurance benefits such as various types of fully funded and ``privatized'' Social Security systems (such as the system adopted in Chile). A large share of the course will be devoted to evaluations of various trade-offs involved in setting social insurance policy, including balancing the efficiency costs of implementing social insurance systems (e.g. its potential ``moral hazard'' or disincentive effects in crowding out private insurance markets, reducing private saving, and reducing labor supply) against the welfare gains provided by the intragenerational and intergenerational risk sharing features of social insurance institutions. Note about reading list: I have produced a long reading list for benefit of students who which to explore topics covered in this course in further detail. The actual readings covered in lectures will be only a small subset of what is included below. Key readings will be highlighted in advance of lecture. I. Introduction and Overview Introduction to the Economic Analysis of Social Insurance John Rust II. Social Insurance in a Time of Demographic Transition: Will the Baby Boomers Usher in an ``Old Age Crisis''? World Bank (1994) Averting the Old Age Crisis World Bank Publications, Washington D.C. Book itself: Available at Amazon.com (new $30.00, used, $12-$15) Technical Appendix (free from Wordlbank.org) Working Paper 1570: Protecting the Old and Promoting Growth: A Defense of Averting the Old Age Crisis     by Estelle James (free from Worldbank.org) Main Points from Averting the Old Age Crisis John Rust (free) Human Population Through History: 1AD to 2020 from John H. Tanton (1995) End of the Migration Epoch The World's Population: An Overview Ken Peterson, Furman University. Population Numbers and Trends United Nations UNFPA. Graph of Evolution of World Population from Robert W. Fogel, 2000 The Fourth Great Awakening & the Future of Egalitarianism The Aging of the World's Population United Nations. Global Shifts in Population Rand Corporation. The End of World Population Growth by W. Lutz, W. Sanderson,and S. Scherbov, 2001 Nature. Shoven, J.B. M.D. Topper and D.A. Wise (1994) ``The Impact of the Demographic Transition on Government Spending'' in D.A. Wise (ed.) Studies in the Economics of Aging University of Chicago Press, 13-40. Easterlin, R.A. C. M. Schaeffer and D. J. Macunovich (1993) ``Will the Baby Boomers be Less Well Off than their Parents?'' Income, Wealth, and Family Circumstances Over the Life Cycle in the U.S.'' Population and Development Review 19-3 497-522. III. Survey of Social Insurance Institutions Around the World Martin Feldstein and Jeffrey B. Liebman (2001) Social Security NBER working paper 8451. U.S. Dept. of Health and Human Services (1999) Social Security Programs Throughout the World U.S. Government Printing Office, Washington, D.C. Gruber, J.H. and D.A. Wise (1998) Social Security and Retirement Around the World University of Chicago Press. Gruber, J.H. and D.A. Wise (2001) An International Perspective on Policies for An Aging Society Peracchi, Franco (1998) ``Patterns of Social Protection Expenditure in the European Union'' IV. Historical Overview of Social Insurance and Retirement Systems Verbon, H. (1988) The Evolution of Public Pension Schemes Springer-Verlag, Amsterdam. History of Pensions in the UK Social Security: A Brief History U.S. Social Security Administration. The Lack of Social Security in Victorian England George P. Landow. Otto von Bismarck and the establishment of the first government social insurance program U.S. Social Security Administration. Costa, D.L. (1998) The Evolution of Retirement: An American Economic History 1880-1990 Ball, R.M. (1988) ``The Original Understanding on Social Security: Implications for Later Developments'' in T. Marmor and J. Mashaw (eds.) Social Security: Beyond the Rhetoric of Crisis Princeton University Press, 17-40. Ransom, R.L. and R. Sutch (1988) ``The Decline of Retirement in the Years Before Social Security: U.S. Retirement Patterns 1870-1937'' in R. Ricardo-Campbell and E. Lazear (eds.) Issues in Contemporary Retirement Hoover Institution Press, Stanford, California. Miron, J.A. and D. N. Weil (1998) ``The Genesis and Evolution of Social Security in M.D. Bordo, C. Goldin and E. N. White (eds.) The Defining Moment: the Great Depression and the American Economy in the Twentieth Century University of Chicago Press. Poterba, J. (1997) ``The History of Annuities in the United States'' NBER Working Paper 6001. IV. Why is the Government in the Social Insurance Business? Blinder, A. (1988) ``Why is the Government in the Pension Business?'' in Susan M. Wachter (ed.) Social Security and Private Pensions: Providing for Retirement in the 21st Century Heath, Lexington, MA, 17-34. Diamond, P. (1977) ``A Framework for Social Security Analysis'' Journal of Public Economics 8 275-298. Feldstein, M. (1977) ``Social Insurance'' Public Policy 25 81-115. Varian, H. (1980) ``Redistributive Taxation as Social Insurance'' Journal of Public Economics 14 49-68. Bodie, Z. (1989) ``Pensions as Retirement Income Insurance'' NBER Working Paper 2917. Merton, R.C. (1983) ``On the Role of Social Security as a Means for Efficienct Risk-Bearing in an Economy where Human Capital is not Tradable'' in Z. Bodie and J. Shoven (eds.) Financial Aspects of the United States Pension System University of Chicago Press. V. Review of Moral Hazard and Adverse Selection Reasons for Failure of Competitive Insurance Markets Diamond, P. (1993) ``Issues in Social Insurance'' Nancy L. Schwartz Lecture, Northwestern University. Rothschild, M. and J. Stiglitz (1976) ``Equilibrium in Competitive Insurance Markets'' Quarterly Journal of Economics 629-649. Wilson, C. (1980) ``The Nature of Equilibrium in Markets with Adverse Selection'' Bell Journal of Economics 108-130. Shavell, S. 91979) ``On Moral Hazard and Insurance'' Quarterly Journal of Economics 93 541-562. VI. Overview of Policy Issues in Social Insurance Aaron, H.J. Economic Effects of Social Security The Brookings Institution, Washington, D.C. Derthick, M. (1979) Policymaking for Social Security Brookings Institution, Washington, D.C. Citro, C.A. and E.A. Hanushek (eds.) (1997) Assessing Policies for Retirement Income National Research Council. VII. Neutrality Results for Social Insurance and Government Transfer Programs Bernheim, B.D. and K. Bagwell (1988) ``Is Everything Neutral?'' Journal of Political Economy 96-2 308-338. Pestieau, P. and U. Possen (1997) ``Investing Social Security in the Equity Market: Does it Make a Difference?'' manuscript, Cornell University. VIII. Modeling Individual Retirement Behavior VIII-A: Theoretical Literature Crawford, V. and Lilien, D. (1981) ``Social Security and the Retirement Decision'' Quarterly Journal of Economics 3 505-534. VIII-B: Empirical Literature Lumsdaine, R.L. and O.S. Mitchell (1998) ``New Developments in the Economic Analysis of Retirement Behavior'' forthcoming in O. Ashenfelter and D. Card (eds.) Handbook of Labour Economics. Lumsdaine, R.L. and D.A. Wise (1994) ``Aging and Labor Force Participation: A Review of Trends and Explanations'' in Y. Noguchi and D.A. Wise (eds.) Aging in the United States and Japan: Economic Trends University of Chicago Press. Citro, C.A. and E.A. Hanushek (eds.) (1996) Assessing Knowledge of Retirement Behavior National Research Council. Quinn, J.F. Burkhauser, R.V. and D.A. Myers (1990) Passing the Torch: The Influence of Economic Incentives on Work and Retirement W.E. Upjohn Institute for Employment Research, Kalamazoo, Michigan. Fields, G.S. and O.S. Mitchell (1984) Retirement, Pensions, and Social Security MIT Press, Cambridge, Massachusetts. Moffitt, R.A. (1987) ``Life-Cycle Labor Supply and Social Security: A Time-Series Analysis'' in G. Burtless (ed.) Work, Health, and Income among the Elderly The Brookings Institution, Washington, D.C. Rust, J. (1989) ``A Dynamic Programming Model of Retirement Behavior'' in D. Wise (ed.) The Economics of Aging University of Chicago Press, 359-398. Rust, J. (1990) ``Behavior of Male Workers at the End of the Life-Cycle: An Empirical Analysis of States and Controls'' in D. Wise (ed.) Issues in the Economics of Aging University of Chicago Press. Rust, J. and C. Phelan (1997) ``How Social Security and Medicare Affect Retirement Behavior in a World with Incomplete Markets'' Econometrica 65-4 781-831. Burtless, G. (1986) ``Social Security, Unanticipated Benefit Increases, and the Timing of Retirement'' Review of Economic Studies 53 781-805. Butler, M. (1999) ``Anticipation Effects of Looming Public Pension Reforms'' Carnegie-Rochester Conference Series on Public Policy 50 119-160. Gustman, T. and T.L. Steinmeier (1986) ``A Structural Retirement Model'' Econometica 54-3 555-584. Gustman, T. and Steinmeier, T.L. (1985) ``The 1983 Social Security Reforms and Labor Supply Adjustments of Older Individuals in the Long Run'' Journal of Labor Economics 3 237-253. Berkovec, J. Stern, S. (1991) ``Job Exit Behavior of Older Men'' Econometrica 59-1 189-210. Stock, J. and D.A. Wise (1990) ``Pensions, The Option Value of Work, and Retirement'' Econometrica 58-5 1151-1180. Friedberg, L. (1995) ``The Labor Supply Effects of the Social Security Earnings Test'' manuscript, University of California - San Diego. Krueger, A. and J. Pischke (1992) ``The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation'' Journal of Labor Economics 10-4 412-437. General Accounting Office (1988) Social Security: the Notch Issue Washington, D.C. General Accounting Office. Lumsdaine, R.L., J.H Stock and D.A. Wise (1996) ``Why Are Retirement Rates So High at Age 65?'' in D.A. Wise (ed.) Advances in the Economics of Aging University of Chicago Press, 61-82. Lumsdaine, R. Stock, J. Wise, D. (1992) ``Three Models of Retirement: Computational Complexity vs. Predictive Validity'' in D. Wise (ed.) Topics in the Economics of Aging University of Chicago Press. Lumsdaine, R. J. Stock and D.A. Wise (1994) ``Pension Plan Provisions and Retirement: Men & Women Medicare, and Models'' in D.A. Wise (ed.) Studies in the Economics of Aging University of Chicago Press. Hurd, M. (1996) ``The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers'' in D.A. Wise (ed.) Advances in the Economics of Aging University of Chicago Press, 61-82. Blau, D. (1994) ``A Structual Model of Retirement-Related Labor Market Dynamics'' forthcoming, Econometrica Kahn, J.A. (1988) ``Social Security, Liquidity, and Early Retirement'' Journal of Public Economics 35 97-117. Blinder, A.S. R.H. Gordon and Donald E. Wise (1980) ``Reconsidering the Work Disincentive Effects of Social Security'' National Tax Journal 33 431-442. Axtell, R. and Joshua M. Epstein (1998) ``An Agent-Based Model of Retirement Behavior'' forthcoming in H.A. Aaron (ed.) New Directions in Modeling Retirement Behavior Brookings Institution. IX. Effect of Health Care on Retirement/Savings Behavior Gruber, J. and B.C. Madrian (1996) ``Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage'' in D.A. Wise (ed.) Advances in the Economics of Aging University of Chicago Press, 61-82. Gustman, A. and T.L. Steinmeier (1994) ``Employer Provided Health Insurance and Retirement Behavior'' Industrial and Labor Relations Review 48 124-140. Gruber, J. and B. Madrian (1996) ``Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage'' in D. Wise (ed.) Advances in the Economics of Aging University of Chicago Press. Blau, D. and D. Gilleskie (1997) ``Retiree Health Insurance and the Labor Force Behavior of Men in the 1990's'' manuscript, University of North Carolina. Hubbard, R.G. J. Skinner and S.P. Zeldes (1995) ``Precautionary Saving and Social Insurance'' Journal of Political Economy 103 360-399. Leung, Siu Fai (2000) ``Why Do Some Households Save So Little? A Rational Explanation'' Review of Economic Dynamics 3 771-800. Gruber, J. and A. Yelowitz (1997) ``Public Health Insurance and Private Savings'' NBER Working Paper 6041. X. Intergenerational Transfers and Capital Accumulation Barro, R.J. (1974) ``Are Government Bonds Net Wealth?'' Journal of Political Economy 82-6 1095-1117. Kotlikoff, L.J. and L. Summers (1981) ``The Role of Intergenerational Transfers in Aggregate Capital Accumulation'' Journal of Political Economy 89-4 706-732. Kotlikoff, L.J. and A. Spivak (1981) ``The Family as an Incomplete Annuities Market'' Journal of Political Economy 93-6 372-391. Hayashi, F. Altonji, J. and L.J. Kotlikoff (1996) ``Risk Sharing Between and Within Families'' Econometrica 64-2 261-294. Sala-i-Martin, X. (1992) ``Transfers'' NBEr Working Paer 4186. XI. Political Economy of Social Insurance Lindbeck, A. (1995) ``Hazardous Welfare State Dynamics'' American Economic Review 85-2 9-15. Browning, E.K. (1975) ``Why the Social Insurance Budget is Too Large in a Democratic Society'' Economic Inquiry 13 373-388. Bütler, Monika (1998) ``Anticipation Effects of Looming Public Pension Reforms'' manuscript, Tilburg University, forthcoming in C. Plosser (ed.) Carnegie-Rochester Conference on Public Policy. Boldrin, M. and A. Rustichini (1995) ``Equilibria with Social Security'' D.P. 1068 CMSEMS, Northwestern University. Conesa, J. and D. Krueger (1998) ``Voting on Social Security Reform with Heterogeneous Agents'' manuscript, University of Minnesota. Galasso, V. (1999) The U.S. Social Security System: What Does Political Sustainability Imply? Review of Economic Dynamics 2 698-730. Galasso, V. (1997) ``A Coalition Theory of Social Security'' manuscript Universidad Carlos III, Madrid. Galasso, V. (1998) ``The U.S. Social Security: A Financial Appraisal for the Median Voter'' manuscript Universidad Carlos III, Madrid. XII. Mechanism Design and ``Optimal'' Social Insurance Sheshinski, E. and Y. Weiss (1981) ``Uncertainty and Optimal Social Security Systems'' Quarterly Journal of Economics Diamond, P. and J.A. Mirrlees (1978) ``A Model of Social Insurance with Variable Retirement'' Journal of Public Economics 10 295-336. Karni, E. and Zilcha, Y. (1986) ``Welfare and Comparative Statics Implications of Fair Social Security: A Steady State Analysis'' Journal of Public Economics 30 341-357. Prescott, E.S. (1997) ``Computing Private Information Problems with Dynamic Programming Methods'' manuscript, Federal Reserve Bank of Richmond. Phelan, C. and Townsend, R.M. ``Computing Multiperiod, Information Constrained Optima'' Review of Economic Studies 59 853-882. XIII. Endogenous Incomplete Markets and ``Crowding Out'' of Private Insurance Markets Cutler, D. and J. Gruber (1996) ``Does Public Insurance Crowd Out Private Insurance?'' Quarterly Journal of Economics 111 391-430. XIV. Social Security Reform and the Debate over Privatizating Social Security Feldstein, M. (1974) ``Social Security, Induced Retirement and Aggregate Capital Accumulation'' Journal of Political Economy 82 905-926. Geanakoplos, J. O. Mitchell and S. Zeldes (1998) Social Security Money's Worth manuscript Geanakoplos, J. O. Mitchell and S. Zeldes (1998) Would a Privatized Social Security System Really Pay a Higher Rate of Return? manuscript S.A. Sass and R.K. Triest (eds.) (1997) Social Security Reform Conference Series No. 41, Federal Reserve Bank of Boston. Cooley, T. and J. Soares (1999) Privatizing Social Security Review of Economic Dynamics 2 731-755. Conesa, J.C. and D. Krueger (1999) Social Security Reform with Heterogeneous Agents Review of Economic Dynamics 2 757-795. Feldstein, M. (ed.) (1998) Appendix: The Effect of Privatizing Social Security on Economic Welfare from chapter 1 of Privatizing Social Security University of Chicago Press. Hugget, M. and G. Ventura (1999) On the Distributional Effects of Social Security Reform 2 498-531. World Bank (1994) Issue Brief 2: Pay-as-you-Go or Fully Funded --- Which Costs Less? from World Bank, (1994) Averting the Old Age Crisis page 297-302. Kotlikoff, L.J. K.A. Smetters, and J. Walliser (1998) ``Opting Out of Social Security and Adverse Selection'' NBER Working Paer 6430. Kotlikoff, L. (1998) ``Simulating the Privatization of Social Security in General Equilibrium'' in M. Feldstein (ed.) Privatizing Social Security University of Chicago Press. XIV-A. Effect of Reform on Annuities and Financial Markets Bohn, H. (1997) ``Social Security Reform and Financial Markets'' in S.A. Sass and R.K. Triest (eds.) Social Security Reform Conference Series No. 41, Federal Reserve Bank of Boston. Congressional Budget Office (1998) ``Social Security Privatization and The Annuities Market''. Washawsky, M.J. (1997) ``The Market for Individual Annuities and the Reform of Social Security'' Benefits Quarterly 66-76. XV. Overlapping Generations Models of Social Security Samuelson, P.A. (1958) ``An Exact Consumption Loan Model without the Social Contrivance of Money'' Journal of Political Economy 66 467-482. Diamond, P. (1965) ``National Debt in a Neoclassical Growth Model'' American Economic Review 32-4 289-298. Auerbach, A. and L. Kotlikoff (1987) Dynamic Fiscal Policy Cambridge University Press. Eckstein, Z. Eichenbaum, M. Peled, D. (1985) ``Uncertain Lifetimes and the Welfare Enhancing Properties of Annuity Markets and Social Security'' Journal of Public Economics 26 303-326. Huang, H. S. Imrohoroglu, and T.J. Sargent (1997) ``Two Computations to Fund Social Security'' Macroeconomic Dynamics 1-1 7-44. De Nardi, M. S. Imorohoroglu, and T.J. Sargent (1999) ``Projected U.S. Demographics and Social Security'' Review of Economic Dynamics 2 575--615. Cooley, T. and Soares, J. (1996) ``Will Social Security Survive the Baby Boom?'' Carnegie Rochester Conference Series on Public Policy. Kotlikoff, L.J. (1996) ``Privatizing Social Security: How it Works and Why it Matters'' in J. Poterba (ed.) Tax Policy and the Economy. Feldstein, M. (1995) ``Would Privatizing Social Security Raise Economic Welfare?'' NBER Working paper 5281. Storesletten, K. Telmer, C. and A. Yaron (199r98) ``The Risk Sharing Implications of Alternative Social Security Arrangements'' Carnegie-Rochester Conference on Public Policy 50 213-267. (for smaller preprint version, click here) Imrohoroglu, Ayse, S. Imrohoroglu, and D. H. Joines (1995) ``A Life Cycle Analysis of Social Security'' Economic Theory 6-1 83-114. Low, H. (1998) ``Self-insurance, Life-cycle Labour Supply and Savings Behavior'' mansucript University College, London. Geanakoplos, J. (1995) ``Optimal Security Design in Incomplete Markets'' in M. Shubik (ed.) New Developments in General Equilibrium Theory Yale University Press. Hubbard, R. G. and K.L. Judd (1987) ``Social Security and Individual Welfare: Precautionary Saving, Borrowing Constraints, and the Payroll Tax'' American Economic Review 77-4 630-646. Imrohoroglu, A. S. Imrohoroglu and D.H. Joines (2000) "Computing Models of Social Security" in R. Marimon and A. Scott (eds.) Computational Methods for the Study of Dynamic Economies Oxford University Press, 221-237. Imrohoroglu, A. S. Imrohoroglu, and D.H. Joines (1993) ``A Numerical Algorithm for Solving Models with Incomplete Markets'' International Journal of Supercomputer Applications 7-3 212-231. Imrohoroglu, A. S. Imrohoroglu and D. Joines (1995) ``A Life Cycle Model of Social Security'' Economic Theory 6 83-114. Fuster, L. (1999) ``Is Altruism Important for Understanding the Long Run Effects of Social Security?'' Review of Economic Dynamics 2 616-637. XVI. Disability Insurance Bound, J. and R.V. Burkhauser (1998) ``Economic Analysis of of Transfer Programs Targeted on People with Disabilities'' forthcoming in O. Ashenfelter and D. Card (eds.) Handbook of Labour Economics. Aarts, L.J.M. and P.R. De Jong (1992) Economic Aspects of Disability Behavior North Holland, Amsterdam. Aarts, L.J.M., R.V. Burkhauser, and P.R. De Jong (1996) Curing the Dutch Disease: An International Perspective on Disability Policy Reform Akerlof, G.A. (1978) ``The Economics of `Tagging' as Applied to the Optimal Income Tax, Welfare Programs, and Manpower Training'' American Economic Review 68 8-19. Diamond, P. and J.A. Mirrlees (1978) ``A Model of Social Insurance with Variable Retirement'' Journal of Public Economics 10 295-336. Diamond, P. and E. Sheshinski (1995) ``Economics Aspects of Optimal Disability Benefits'' Journal of Public Economics 57 1-23. Parsons, D.O. (1996) ``Imperfect `Tagging' in Social Insurance Programs'' Journal of Public Economics 62 183-207. Stern, N. (1982) ``Optimum Taxation with Errors in Administration'' Journal of Public Economics 17 181-212. Mashaw, J.L. (1988) ``Disability Insurance in an Age of Retrenchment: The Politics of Implementing Rights'' in T. Marmor and J. Mashaw (eds.) Social Security: Beyond the Rhetoric of Crisis Princeton University Press, 151-176. Lahiri, K., Vaughan, D.R. and B. Wixon (1995): ``Modeling SSA's Sequential Disability Determination Process Using Matched SIData,'' Social Security Bulletin, 58 No. 4, 3-42. Benitez-Silva, H., Buchinsky, M. Chan, H. and S. Sheidvasser (1998) ``An Empirical Analysis of the Social Security Disability Application, Appeal and Award Process'' forthcoming in the Journal of Labour Economics. Stapleton, D., Barnow, B., Coleman, K., Dietrich, K. and G. Lo (1994): Labor Markets Conditions, Socioeconomic Factors and the Growth of Aications and Awards for SSDI and SSDI Disability Benefits: Final Report, Lewin-VHI, Inc. and the Department of Health and Human Services, The Office of the Assistant Secretary for Planning and Evaluation. Nagi, S.Z. (1969): Disability and Rehabilitation: Legal, Clinical, and Self-Concepts and Measurement Ohio State University Press. Emanuel, H. De Gier, E.H. and P.A.B. Kalker Konijn (eds.) (1987) Disability Benefits: Factors Determining Application and Awards Volume 59 in Contemporary Studies in Economic and Financial Analysis, Graduate School of Business Administration, New York University. Bound, J. (1989) ``The Health and Earnings of Rejected Disability Insurance Applicants'' American Economic Review 79 482-503. Bound, J. (1991) ``Self-Reported Health Vs. Objective Measures of Health in Retirement Models'' Journal of Human Resources 26 106-138. Bound, J. and T. Waidmann (1990) ``Disability Transfers and the Labor Force Attachment of Older Men: Evidence form the Historical Record'' Quarterly Journal of Economics 107-4 1393-1419. Feldstein, M. (1998) ``Introduction'' in M. Feldstein (ed.) Privatizing Social Security University of Chicago Press. XVII. Unemployment Insurance Shavell, S. and L. Weiss (1979) ``The Optimal Payment of Unemployment Insurance Benefits Over Time'' Journal of Political Economy 87 1347-1362. Hansen, G. and A. Imorohoroglu, (1992) ``The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard'' Journal of Political Economy 100 118-142. Hopenhayn, H. and J.P. Nicolini (1997) ``Optimal Unemployment Insurance'' Journal of Political Economy 105-2 412-438. Meyer, B. (1990) ``Unemployment Insurance and Unemployment Spells'' Econometrica 58 757-782. Ljungqvist, L. and T.J. Sargent (1998) ``The European Unemployment Dilemma'' Journal of Political Economy 106-3 514-550. Ljungqvist, L. and T.J. Sargent (1995) ``Welfare States and Unemployment'' Economic Theory 6 143-160. Ljungqvist, L. and T.J. Sargent (1995) ``The Swedish Unemployment Experience'' European Economic Review 39 1043-1070.