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The Supplemental Security Income Program and Incentives to Take Up Social Security Early Retirement: Empirical Evidence from Matched SIPP and Social.

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  • Elizabeth Powers
  • David Neumark

Abstract

Features of the Supplemental Security Income (SSI) program and the social security retirement system may interact in a manner that creates incentives for prospective SSI recipients to take social security early retirement (SSER). This paper takes a first close look at this issue. The work disincentives posed by SSI rules and the potential interactions between the SSI and SSER programs are outlined in a basic theoretical framework. The hypotheses that emerge can be tested using public-use microdata linked to Social Security Administration records. We first present evidence supporting the hypothesis that SSI rules induce prospective SSI recipients to substantially reduce work activity (by various measures) prior to age 65. We then present two types of evidence on SSI-SSER interactions. We do not find a simple correspondence between generous SSI benefits and SSER use, which might be an expected indirect SSI-SSER interaction. However, estimates for some specifications for SSER receipt, derived directly from the theoretical interaction between SSER and SSI rules through the household budget constraint, provide evidence of a direct interaction between SSER and SSI, with SSI inducing use of SSER for those individuals for whom the SSI-SSER interaction eliminates the reduction in benefits associated with early receipt of social security benefits.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8670.

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Date of creation: Dec 2001
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Publication status: published as Powers, Elizabeth T. and David Neumark. "The Supplemental Security Income Program And Incentives To Claim Social Security Retirement Early," National Tax Journal, 2005, v58(1,Mar), 5-26.
Handle: RePEc:nbr:nberwo:8670

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  1. David Neumark & Elizabeth Powers, 1998. "Welfare for the Elderly: The Effects of SSI on Pre-Retirement Labor Supply," NBER Working Papers 6805, National Bureau of Economic Research, Inc.
  2. Aaron Yelowitz, 1997. "Why Did the SSI-Disabled Program Grow So Much? Disentangling the Effect of Medicaid," NBER Working Papers 6139, National Bureau of Economic Research, Inc.
  3. Aaron Yelowitz, 1995. "The Medicaid Notch, Labor Supply and Welfare Participation: Evidence from Eligibility Expansions," UCLA Economics Working Papers 738, UCLA Department of Economics.
  4. David Neumark & Elizabeth Powers, . "Means Testing Social Security," Pension Research Council Working Papers 97-24, Wharton School Pension Research Council, University of Pennsylvania.
  5. Bowen Garrett & Sherry Glied, 2000. "Does state AFDC generosity affect child SSI participation?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(2), pages 275-295.
  6. David Neumark & Elizabeth Powers, 1997. "The Effect of Means-Tested Income Support for the Elderly on Pre-Retirement Saving: Evidence from the SSI Program in the U.S," NBER Working Papers 6303, National Bureau of Economic Research, Inc.
  7. Lundberg, Shelly J, 1988. "Labor Supply of Husbands and Wives: A Simultaneous Equations Approach," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 224-35, May.
  8. Rebecca M. Blank, 1989. "The Effect of Medical Need and Medicaid on AFDC Participation," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 54-87.
  9. Jonathan Gruber & Peter Orszag, 1999. "What To Do About The Social Security Earnings Test?," Issues in Brief ib-1, Center for Retirement Research.
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Cited by:
  1. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics.
  2. Elizabeth T. Powers & David Neumark, 2003. "The Supplemental Security Income Program and Incentives to Claim Social Security Retirement Early: Empirical Evidence from Matched SIPP and Social Security Administrative Files," Working Papers wp036, University of Michigan, Michigan Retirement Research Center.

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