Work in Progress

Precautionary Retirement (Job Market Paper)

• Abstract. With Social Security's trust fund facing depletion, this paper studies how the system's regressive payroll tax shapes labor supply and retirement decision, motivated by an observation that high-income older males work more. We develop a tractable labor supply model with heterogeneous work-costs, demonstrating that the elasticity of labor supply to financial incentives is inherently distributional. High-income workers, further from retirement cutoff, primarily adjust their hours (intensive margin), while those with higher work-costs adjust participation (extensive margin). Our central contribution is the measurement of these income group-specific elasticities, providing a framework to evaluate the distributional effects of policy reforms.

Ambiguity Aversion and Fertility Decisions

• Abstract. This paper investigates how ambiguity aversion affects fertility decisions, considering the uncertainty surrounding the benefits of parenthood. We extend the Becker and Barro (1988) fertility model by incorporating ambiguity aversion to capture parents’ decision-making process accurately. We assume that individuals care about their own and children’s well-being (dynastic altruism) and face ambiguity about their children’s future abilities (ambiguity aversion). Using a multiple priors utility framework, we model parents’ preferences as maximizing their minimum expected utility of descendants, focusing on the worst-case scenario for their child’s ability. Our findings suggest that more ambiguity-averse parents tend to have fewer children, as they emphasize the lowest possible outcome. This insight helps explain declining fertility rates and rising childlessness in developed countries, as individuals prioritize predictable outcomes over uncertain returns of parenthood.