Frank N. Caliendo

Department of Economics and Finance
Utah State University
Logan, UT 84322-3565

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Institutional Affiliation: Utah State University

NBER Working Papers and Publications

August 2017Survival Ambiguity and Welfare
with Aspen Gorry, Sita Slavov: w23648
Nearly all life-cycle models adopt Yaari's (1965) assumption that individuals know the survival probabilities that they face. Given that an individual's exact survival probabilities are likely unknown, we explore the implications of relaxing this assumption. If there is no annuity market, then the welfare cost of survival ambiguity is large and regressive. Individuals would pay as much as 1% of total lifetime consumption for immediate resolution of ambiguity and the bottom income quintile is 4 times worse off than the top quintile. Alternatively, with the availability of competitive annuity contracts, survival ambiguity is welfare improving because it allows competitive insurance companies to pool risk across survival types. Even though Social Security and annuities share some properties, ...

Published: Frank N. Caliendo & Aspen Gorry & Sita Slavov, 2019. "Survival ambiguity and welfare," Journal of Economic Behavior & Organization, . citation courtesy of

June 2017Social Security and Saving: An Update
with Sita Slavov, Devon Gorry, Aspen Gorry: w23506
Typical neoclassical life-cycle models predict that Social Security has a large and negative effect on private savings. We review this theoretical literature by constructing a model where individuals face uninsurable longevity risk and differ by wage earnings, while Social Security provides benefits as a life annuity with higher replacement rates for the poor. We use the model to generate numerical examples that confirm the standard result. Using several benefit and tax changes from the 1970s and 1980s as natural experiments, we investigate the empirical relationship between Social Security and private savings and find little to support the strong predictions from the theoretical model. We explore possible reasons for the divergence between theoretical predictions and empirical findings.


September 2016The Welfare Cost of Retirement Uncertainty
with Maria Casanova, Aspen Gorry, Sita Slavov: w22609
Uncertainty about the timing of retirement is a major financial risk with implications for decision making and welfare over the life cycle. We estimate that the standard deviation of the difference between retirement expectations and actual retirement dates ranges from 4.28 to 6.92 years. We develop a quantitative model to assess the impact of this risk. Individuals would give up 2.6%-5.7% of total lifetime consumption to fully insure this risk and 1.9%-4.0% of lifetime consumption simply to know their actual retirement date at age 23. While social insurance programs could be designed to hedge this risk, current programs in the U.S. (OASI and SSDI) provide very little timing insurance.
September 2015The Cost of Uncertainty about the Timing of Social Security Reform
with Aspen Gorry, Sita Slavov: w21585
We develop a model to study optimal decision making in the face of uncertainty about the timing and structure of a future event. The model is used to study optimal decision making and welfare when individuals face uncertainty about when and how Social Security will be reformed. When individuals save optimally for retirement, the welfare cost of uncertainty about the timing and structure of reform is just a few basis points of total lifetime consumption. In contrast, the cost of reform uncertainty can be greater than 1% of total lifetime consumption for individuals who do not save.

Published: Frank N. Caliendo & Aspen Gorry & Sita Slavov, 2019. "The Cost of Uncertainty about the Timing of Social Security Reform," European Economic Review, . citation courtesy of

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