The destabilizing effects of the social norm to work under a social security system |
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| Institution: | 1. BETA, University of Strasbourg, Institut Universitaire de France, France;2. UCP, Católica Lisbon School of Business and Economics, Portugal;3. IZA, Germany;1. Faculty of Science and Engineering, Doshisha University, Japan;2. Faculty of Agriculture, Kyushu University, Japan;3. The United Graduate School of Agricultural Sciences, Ehime University, Japan;4. Graduate School of Environmental and Life Science, Okayama University, Japan;5. Agriculture Unit, Natural Sciences Cluster, Research and Education Faculty, Kochi University, Japan;1. Dipartimento di Sociologia e ricerca sociale, Università di Trento, Italy;2. Dipartimento di Informatica, Università di Verona, Italy;3. School of Industrial and Systems Engineering, Georgia Institute of Technology, United States |
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| Abstract: | 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. |
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