IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v18y2011i5p676-686.html
   My bibliography  Save this article

Social Security and elderly labor supply: Evidence from the Health and Retirement Study

Author

Listed:
  • Vere, James P.

Abstract

This study uses panel data from the Health and Retirement Study (HRS) to estimate the effects of Social Security income on elderly labor supply in the 1990s and early 2000s. The identification strategy takes advantage of the 1977 amendments to the Social Security Act, which led to a large, unanticipated reduction in Social Security benefits for those born after January 1, 1917. Despite the advanced age of the notch cohorts, there is a significant, negative and surprisingly elastic relationship between Social Security income and hours of work. This suggests that currently proposed reductions in benefits would induce Social Security recipients to work more hours in retirement, even through their 70s and early 80s.

Suggested Citation

  • Vere, James P., 2011. "Social Security and elderly labor supply: Evidence from the Health and Retirement Study," Labour Economics, Elsevier, vol. 18(5), pages 676-686, October.
    • Handle: RePEc:eee:labeco:v:18:y:2011:i:5:p:676-686
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927537111000285
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Burtless, Gary & Moffitt, Robert A, 1985. "The Joint Choice of Retirement Age and Postretirement Hours of Work," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 209-236, April.
    2. Gary V. Engelhardt & Jonathan Gruber & Cynthia D. Perry, 2005. "Social Security and Elderly Living Arrangements: Evidence from the Social Security Notch," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    3. Steven Haider & David Loughran, 2001. "Elderly Labor Supply: Work or Play?," Working Papers 01-09, RAND Corporation.
    4. Hugo Benítez-Silva & Frank Heiland, 2007. "The social security earnings test and work incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 26(3), pages 527-555.
    5. Steven Haider & David S Loughran, 2001. "Elderly Labor Supply Work or Play?," Working Papers DRU-2582, RAND Corporation.
    6. John R. Moran & JKosali Ilayperuma Simon, 2006. "Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
    7. Krueger, Alan B & Pischke, Jorn-Steffen, 1992. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 412-437, October.
    8. Michael Hurd & Kathleen McGarry, 1993. "The Relationship Between Job Characteristics and Retirement," NBER Working Papers 4558, National Bureau of Economic Research, Inc.
    9. Gruber, Jonathan & Orszag, Peter, 2003. "Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(4), pages 755-773, December.
    10. John R. Moran & Kosali Ilayperuma Simon, 2004. "Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts," Center for Policy Research Working Papers 66, Center for Policy Research, Maxwell School, Syracuse University.
    11. David Neumark & Wendy A. Stock, 1999. "Age Discrimination Laws and Labor Market Efficiency," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 1081-1110, October.
    12. Engelhardt, Gary V. & Kumar, Anil, 2009. "The repeal of the retirement earnings test and the labor supply of older men," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(4), pages 429-450, October.
    13. Steven J. Haider & David S. Loughran, 2008. "The Effect of the Social Security Earnings Test on Male Labor Supply: New Evidence from Survey and Administrative Data," Journal of Human Resources, University of Wisconsin Press, vol. 43(1).
    14. Alan L. Gustman & Thomas Steinmeier, 2008. "How Changes in Social Security Affect Recent Retirement Trends," NBER Working Papers 14105, National Bureau of Economic Research, Inc.
    15. Michael D. Hurd & Michael J. Boskin, 1984. "The Effect of Social Security on Retirement in the Early 1970s," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 767-790.
    16. Diamond Peter A & Orszag Peter R, 2005. "Saving Social Security: The Diamond-Orszag Plan," The Economists' Voice, De Gruyter, vol. 2(1), pages 1-9, April.
    17. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    18. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    19. Engelhardt, Gary V., 2008. "Social security and elderly homeownership," Journal of Urban Economics, Elsevier, vol. 63(1), pages 280-305, January.
    20. Gary Burtless, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(5), pages 781-805.
    21. Peter A. Diamond & Peter R. Orszag, 2005. "Saving Social Security," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 11-32, Spring.
    22. Balestra, Pietro & Varadharajan-Krishnakumar, Jayalakshmi, 1987. "Full Information Estimations of a System of Simultaneous Equations with Error Component Structure," Econometric Theory, Cambridge University Press, vol. 3(2), pages 223-246, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ning, Manxiu & Gong, Jinquan & Zheng, Xuhui & Zhuang, Jun, 2016. "Does New Rural Pension Scheme decrease elderly labor supply? Evidence from CHARLS," China Economic Review, Elsevier, vol. 41(C), pages 315-330.
    2. Giles, John T. & Wang, Dewen & Cai, Wei, 2011. "The Labor Supply and Retirement Behavior of China's Older Workers and Elderly in Comparative Perspective," IZA Discussion Papers 6088, Institute of Labor Economics (IZA).
    3. Begley, Jaclene & Chan, Sewin, 2018. "The effect of housing wealth shocks on work and retirement decisions," Regional Science and Urban Economics, Elsevier, vol. 73(C), pages 180-195.
    4. Shu, Lei, 2017. "Essays on retirement income provision," Other publications TiSEM e5dd8c4e-03bf-4ec9-9651-b, Tilburg University, School of Economics and Management.
    5. Shu, Lei, 2018. "The effect of the New Rural Social Pension Insurance program on the retirement and labor supply decision in China," The Journal of the Economics of Ageing, Elsevier, vol. 12(C), pages 135-150.
    6. J. Wilson Mixon Jr. & E. Frank Stephenson, 2016. "Young and Out of Work: An Analysis of Teenage Summer Employment, 1972–2012," Cato Journal, Cato Journal, Cato Institute, vol. 36(1), pages 89-99, Winter.
    7. Lingxiao Zhao & Gregory Burge, 2017. "Housing Wealth, Property Taxes, and Labor Supply among the Elderly," Journal of Labor Economics, University of Chicago Press, vol. 35(1), pages 227-263.
    8. Giles, John & Lei, Xiaoyan & Wang, Gewei & Wang, Yafeng & Zhao, Yaohui, 2023. "One country, two systems: evidence on retirement patterns in China," Journal of Pension Economics and Finance, Cambridge University Press, vol. 22(2), pages 188-210, April.
    9. Zuojuan Li & Guofeng Li & Ke Zhang & Jingxin Zhu, 2022. "Do Social Pension and Family Support Affect Farmers’ Land Transfer? Evidence from China," Land, MDPI, vol. 11(4), pages 1-14, March.
    10. Pei, Donghui & Wang, Baoqian, 2024. "Pension insurance contribution rate and corporate investment efficiency," Finance Research Letters, Elsevier, vol. 62(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goda, Gopi Shah & Golberstein, Ezra & Grabowski, David C., 2011. "Income and the utilization of long-term care services: Evidence from the Social Security benefit notch," Journal of Health Economics, Elsevier, vol. 30(4), pages 719-729, July.
    2. Lucie Schmidt & Purvi Sevak, 2006. "Taxes, Wages, and the Labor Supply of Older Americans," Working Papers wp139, University of Michigan, Michigan Retirement Research Center.
    3. John Cawley & John Moran & Kosali Simon, 2010. "The impact of income on the weight of elderly Americans," Health Economics, John Wiley & Sons, Ltd., vol. 19(8), pages 979-993, August.
    4. Tsai, Yuping, 2015. "Social security income and the utilization of home care: Evidence from the social security notch," Journal of Health Economics, Elsevier, vol. 43(C), pages 45-55.
    5. Padmaja Ayyagari & David Frisvold, 2015. "The Impact of Social Security Income on Cognitive Function at Older Ages," NBER Working Papers 21484, National Bureau of Economic Research, Inc.
    6. Engelhardt, Gary V., 2008. "Social security and elderly homeownership," Journal of Urban Economics, Elsevier, vol. 63(1), pages 280-305, January.
    7. Yuping Tsai, 2018. "Social Security Income and Health Care Spending: Evidence from the Social Security Notch," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(2), pages 440-464, April.
    8. Itay Saporta-Eksten & Ity Shurtz & Sarit Weisburd, 2021. "Social Security, Labor Supply, and Health of Older Workers: Quasi-Experimental Evidence from a Large Reform [Identification and Estimation of Local Average Treatment Effects]," Journal of the European Economic Association, European Economic Association, vol. 19(4), pages 2168-2208.
    9. Leonard E. Burman & Norma B. Coe & Kevin Pierce & Liu Tian, 2014. "The Effects of the Taxation of Social Security Benefits on Older Workers’ Income and Claiming Decisions," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(2), pages 459-486, June.
    10. Siha Lee & Kegon Teng Kok Tan, 2023. "Bequest Motives and the Social Security Notch," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 888-914, December.
    11. Tengjiao Chen & Yajie Sheng & Yu Xu, 2020. "The Anticipation Effect of the Earnings Test Reform on Younger Cohorts," Public Finance Review, , vol. 48(4), pages 387-424, July.
    12. Liebman, Jeffrey B. & Luttmer, Erzo F.P. & Seif, David G., 2009. "Labor supply responses to marginal Social Security benefits: Evidence from discontinuities," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1208-1223, December.
    13. Shimizutani, Satoshi & Oshio, Takashi, 2013. "Revisiting the labor supply effect of social security earnings test: New evidence from its elimination and reinstatement in Japan," Japan and the World Economy, Elsevier, vol. 28(C), pages 99-111.
    14. Steven J. Haider & David S. Loughran, 2003. "How Important Are Wages to the Elderly? Evidence from the New Beneficiary Data System and the Social Security Earnings Test," Working Papers wp049, University of Michigan, Michigan Retirement Research Center.
    15. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    16. Lingxiao Zhao & Gregory Burge, 2017. "Housing Wealth, Property Taxes, and Labor Supply among the Elderly," Journal of Labor Economics, University of Chicago Press, vol. 35(1), pages 227-263.
    17. Courtney C. Coile, 2015. "Economic Determinants Of Workers’ Retirement Decisions," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 830-853, September.
    18. Alicia H. Munnell & Steven A. Sass, 2007. "The Labor Supply of Older Americans," Working Papers, Center for Retirement Research at Boston College wp2007-12, Center for Retirement Research, revised Jun 2007.
    19. Staubli, Stefan & Zweimüller, Josef, 2011. "Does Raising the Retirement Age Increase Employment of Older Workers?," IZA Discussion Papers 5863, Institute of Labor Economics (IZA).
    20. Malkova, Olga, 2020. "Did Soviet elderly employment respond to financial incentives? Evidence from pension reforms," Journal of Public Economics, Elsevier, vol. 182(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:18:y:2011:i:5:p:676-686. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/labeco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.