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Social Security and Elderly Living Arrangements: Evidence from the Social Security Notch

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  • Gary V. Engelhardt
  • Jonathan Gruber
  • Cynthia D. Perry
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    Abstract

    Previous studies of the effect of Social Security on elderly living arrangements generally have relied on data from the distant past or differences in benefits across families or cohorts that potentially were correlated with other determinants of living arrangements. Using data from the 1980–99 Current Population Surveys, we attempt to isolate the causal effect of Social Security on living arrangements with an instrumental-variable approach that relies on the large shifts in benefits for cohorts born from 1910–21, the socalled Social Security notch. Over all elderly households, the estimated elasticity of living with others with respect to Social Security income is -0.4, with elasticities of -1.3 and -1.4 for the widowed and divorced, respectively; most of the effects on living arrangements appear to be concentrated among the lesser educated as well. Our estimated elasticities are substantially larger than those from previous studies and suggest that reductions in current benefits would alter living arrangements significantly.

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    Bibliographic Info

    Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

    Volume (Year): 40 (2005)
    Issue (Month): 2 ()
    Pages:

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    Handle: RePEc:uwp:jhriss:v:40:y:2005:i:2:p354-372

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    Web page: http://jhr.uwpress.org/

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    Cited by:
    1. Cunningham, Christopher R. & Engelhardt, Gary V., 2008. "Housing capital-gains taxation and homeowner mobility: Evidence from the Taxpayer Relief Act of 1997," Journal of Urban Economics, Elsevier, vol. 63(3), pages 803-815, May.
    2. Engelhardt, Gary V., 2008. "Social security and elderly homeownership," Journal of Urban Economics, Elsevier, vol. 63(1), pages 280-305, January.
    3. Danzer, Alexander M., 2011. "Benefit Generosity and the Income Effect on Labor Supply: Quasi-Experimental Evidence," Proceedings of the German Development Economics Conference, Berlin 2011, Verein für Socialpolitik, Research Committee Development Economics 23, Verein für Socialpolitik, Research Committee Development Economics.
    4. Vere, James P., 2011. "Social Security and elderly labor supply: Evidence from the Health and Retirement Study," Labour Economics, Elsevier, Elsevier, vol. 18(5), pages 676-686, October.
    5. John Cawley & John R. Moran & Kosali I. Simon, 2008. "The Impact of Income on the Weight of Elderly Americans," NBER Working Papers 14104, National Bureau of Economic Research, Inc.
    6. Engelhardt, Gary V. & Greenhalgh-Stanley, Nadia, 2010. "Home health care and the housing and living arrangements of the elderly," Journal of Urban Economics, Elsevier, vol. 67(2), pages 226-238, March.
    7. Jie Pan & Gary Wagner, 2011. "The Effect of State Tax Preferences on the Living Arrangements of Elderly Individuals," International Advances in Economic Research, Springer, Springer, vol. 17(2), pages 193-210, May.
    8. Danzer, Alexander M., 2010. "Retirement Responses to a Generous Pension Reform: Evidence from a Natural Experiment in Eastern Europe," IZA Discussion Papers 4726, Institute for the Study of Labor (IZA).
    9. Greenhalgh-Stanley, Nadia, 2012. "Medicaid and the housing and asset decisions of the elderly: Evidence from estate recovery programs," Journal of Urban Economics, Elsevier, vol. 72(2), pages 210-224.
    10. Arie Kapteyn & Jinkook Lee & Gema Zamarro, 2013. "Does Retirement Induced through Social Security Pension Eligibility Influence Subjective Well-being? A Cross-Country Comparison," Working Papers, University of Michigan, Michigan Retirement Research Center wp301, University of Michigan, Michigan Retirement Research Center.
    11. Orsini, Chiara, 2010. "Changing the way the elderly live: Evidence from the home health care market in the United States," Journal of Public Economics, Elsevier, Elsevier, vol. 94(1-2), pages 142-152, February.
    12. Gopi Shah Goda & Ezra Golberstein & David C. Grabowski, 2010. "Income and the Utilization of Long-Term Care Services: Evidence from the Social Security Benefit Notch," NBER Working Papers 16076, National Bureau of Economic Research, Inc.
    13. Emiko Takagi & Merril Silverstein, 2011. "Purchasing Piety? Coresidence of Married Children With Their Older Parents in Japan," Demography, Springer, Springer, vol. 48(4), pages 1559-1579, November.

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