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

Rodolphe dos Santos Ferreira, Teresa Lloyd-Braga*, Leonor Modesto

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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.
Original languageEnglish
Pages (from-to)64-72
Number of pages9
JournalMathematical Social Sciences
Volume76
DOIs
Publication statusPublished - 1 Jul 2015

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