You Better Get Married! Marital Status and Intra-Generational Redistribution of Social Security

In this paper, we study the intra-generational redistribution of the U.S. social security system in a dynamic, structural life cycle model of couples with uncertain marital status and survival risk. We focus particularly on auxiliary benefits, namely spousal and survivor benefits, where eligibility is directly linked to marital status. We show that marital stability increases strongly with income, leading to redistribution from the bottom to the top. We evaluate the impact of auxiliary social security benefits on both the poverty rate of the elderly and on household labor supply.