Johanna Wallenius

Abstract In this paper, we develop a life cycle model that features pecuniary and non-pecuniary investments in health in order to rationalize the socioeconomic gradients in health and life expectancy in the United States. Agents accumulate health capital, which affects labor productivity, utility, the distribution of medical spending shocks, and life expectancy. We find that unequal health insurance coverage plays a negligible role in generating the observed gaps in health and longevity. Universal health insurance increases preventive medical spending but not time spent in health promoting activities, as individuals are no longer worried about avoiding high curative medical expenditure shocks due to increased health insurance coverage. Our findings suggest that differences in lifetime income, preferences and health shocks are the main determinants of inequality in life expectancy.

The employment rates of older men have risen dramatically since the mid-1990s in a number of developed economies. Nevertheless, the employment rates of men aged 55–64 in many OECD countries remain at or below the levels observed in the mid-1970s, despite substantial improvements in health and longevity. In this review I summarize some of the driving forces behind the dramatic changes in older men’s employment over the last several decades and discuss the role for retirement reform to further boost employment in the future.

We study the effect of family policies on female employment, fertility, and the gender wage gap. We develop a life-cycle model of heterogeneous households featuring endogenous labor supply, human capital accumulation, fertility, and home production. Our results suggest that human capital accumulation is important in accounting for the widening of the gender wage gap following children. We find that, in aggregate, childcare subsidies promote maternal employment and fertility, although the effects are heterogeneous across couples. A subsidy on home goods increases female employment, but primarily later in life. Thus, it does not dampen the widening of the gender gap.

In this article, we study the labour supply effects and the redistributional consequences of the US social security system. We focus particularly on auxiliary benefits, where eligibility is linked to marital status. To this end, we develop a dynamic. structural life cycle model of singles and couples, featuring uncertain marital status and survival. We account for the socio-economic gradients to both marriage stability and life expectancy. We find that auxiliary benefits have a large depressing effect on married women's employment. Moreover, we show that a revenue neutral minimum benefit scheme would moderately reduce inequality relative to the current US system.

In this paper, we study alternative retirement reforms designed to achieve fiscal sustainability in the face of demographic change. We are particularly interested in the heterogeneous effects across demographic groups, as improvements in health and longevity have not been uniform across the population. To this end, we develop a dynamic, structural life cycle model of heterogeneous agents who face health, mortality and income risk. We consider the following policy reform measures: (1) increasing the early access age to old-age retirement, (2) raising income taxes, (3) lowering old-age retirement benefits and (4) lowering old-age retirement and disability benefits. We find that, of the considered policies, proportionally lowering old-age retirement and disability benefits results in the highest average welfare for all education categories. It is also the most successful at boosting employment.

Using the Consumption Activities Mail Survey (CAMS) module in the HRS, we document how individual time allocations change when one or more household members transitions from full-time work to not working. We find that the ratio of home production to leisure time is approximately constant for both family members. Using a model of household labor supply to understand the implications of this finding, we conclude that the elasticity of substitution between the leisure of the two members is quite large. This elasticity plays a key role in models of household labor supply and is important for understanding how changes in relative wages and taxes affect household labor supply.

We study the role of old-age pensions, disability insurance and healthcare in accounting for the differing labor supply patterns of older individuals across countries. We develop a life cycle model of labor supply and health with heterogeneous agents. In our framework, people choose when to stop working and when/if to apply for disability and pension benefits. We find that the incentives faced by older workers differ hugely across countries. In fact, based solely on differences in social insurance programs, the model predicts even more cross-country variation in the employment rates of people aged 55–69 than we observe in the data.

A standard life cycle model with home production implies a tight relationship between key preference parameters and the changes in time allocated to home production and leisure at retirement. We derive this relationship and use data from the ATUS to explore its quantitative implications. The key finding is that the intertemporal elasticity of substitution for leisure and the elasticity of substitution between time and goods in home production are approximately equal, in contrast to what is commonly assumed.

Sweden is one of the few Western economies to have undertaken a large pension reform in recent years. This was done with great expectations, but little formal analysis. In this paper we develop a life cycle labor supply model to quantify the predicted labor supply implications of this reform. In our framework, individuals choose when to stop working and, given eligibility criteria, when/if to apply for disability and pension benefits. Agents are heterogeneous in skills and receive exogenous shocks to health throughout their life. We find that the new pension system creates large incentives for the continued employment of older workers. This is promising news for countries grappling with pension reform, and indicates that there are significant lessons to be learned from the Swedish case.