Social Security and Retirement across the OECD Countries * [JOB MARKET PAPER] Jorge Alonso Ortiz WP Carey School of Business Arizona State University December 3, 2009 Abstract There are large differences in the employment to population ratio relative to the US across the OECD countries, and these differences are even larger for the old age (55-69 years). There are also large differences in various features of social security, such as the replacement rate, the entitlement age or whether it is allowed to collect social security while working. These observations suggest that they might be an important contributing factor in accounting for differences in retirement. I assess quantitatively the importance of these features using a life cycle general equilibrium model of retirement. I find that the differences in social security account for 90% of the differences in employment to population ratio at ages 60-64 in the OECD. The differences in the replacement rates and whether the system allows for collecting social security while working are the most important contributing factors to account for the differences in retirement. Keywords: Social security, retirement, idiosyncratic labor income risk JEL Codes: E24, H53, J14, J26 * I am deeply indebted to Richard Rogerson, Berthold Herendorf and Roozbeh Hosseini for their intellectual encouragement. I would also like to thanks Kevin Reffet, Manjira Datta, Josep Pijoan-Mas and Manuel Santos for helpful insights and the participants of the Department of Economics’ Macro Seminar and Brown Bag Seminar. Special thanks to Galina Verschagina who patiently discussed my manuscript. 1