The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation
AbstractThis paper uses aggregate birth year/calendar year level data derived from the Current Population Survey (CPS) to estimate the effect of Social Security wealth on the labor supply of older men in the 1970s and 1980s. The analysis focuses on the 1977 amendments to the Social Security Act t which created a substantial t unanticipated differential in benefits for otherwise identical individuals depending on whether they were born before or after 1917. This differential has become known as the benefit notch. There are two principal differences between the present analysis and the previous literature. First t this paper uses time-series variations in benefit levels to estimate the relationship between benefits and labor supply in an era when real benefits were falling for new recipients: Second t variation in benefit levels across cohorts is used to estimate the relationship between benefits and labor supply. The results support a conclusion that labor supply continued to decline for the "notch babies" who received lower Social Security benefits than earlier cohorts.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3699.
Date of creation: May 1991
Date of revision:
Publication status: published as Journal of Labor Economics, Vol. 10, no. 4 (October 1992): 412-437
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Other versions of this item:
- 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, University of Chicago Press, vol. 10(4), pages 412-37, October.
- Alan Krueger & Jorn-Steffen Pischke, 1989. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 635, Princeton University, Department of Economics, Industrial Relations Section..
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
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