MYOPIA AND THE EFFECTS OF SOCIAL SECURITY AND CAPITAL TAXATION ON LABOR SUPPLY

This article analyzes the effect of savings-related policies on labor supply in a model that explicitly incorporates myopic decision-making. Both social security and capital taxation may cause labor supply to rise or fall when individuals are myopic, depending on the curvature of individuals' utility as a function of consumption. Moreover, whatever is the sign of these effects under one assumption about how myopia relates to labor supply decisions, the sign is reversed under the other assumption that is considered. Additionally, some interventions have a first-order effect on labor supply from the outset but others do not, and some labor supply effects rise with the magnitude of the intervention whereas others fall.