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The Effects of Changes in State SSI Supplements on Pre-Retirement Labor Supply

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  • David Neumark
  • Elizabeth T. Powers

Abstract

Because the Supplemental Security Income (SSI) program is means-tested, with both income limits and asset limits, those on the margin of eligibility for the elderly component of the program face incentives to reduce labor supply (or earnings) prior to becoming eligible. Our past research relying on cross-state variation in SSI benefits found evidence consistent with the predicted negative labor supply effects. However, a reliance on cross-state variation necessitated reliance on less-than-ideal control samples. In contrast, this paper uses CPS data covering a 22-year period, which permit identification of the effects of SSI from within-state, time-series variation in SSI benefits, using a better control sample. The evidence points consistently to negative effects of more generous SSI payments on the labor supply of likely SSI participants aged 62-64. The implied elasticities of labor supply with respect to benefits, for those with a high probability of SSI participation, are generally in the range of 0.2 to 0.3, looking at both employment and hours of work.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9851.

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Date of creation: Jul 2003
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Publication status: published as Public Finance Review, Vol. 33, no. 1 (January 2005): 3-35
Handle: RePEc:nbr:nberwo:9851

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  1. 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.
  2. Mitchell, Olivia S, 1988. "Worker Knowledge of Pension Provisions," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 6(1), pages 21-39, January.
  3. Daniel, K., 1991. "Does Marriage Make Men More Productive?," University of Chicago - Economics Research Center, Chicago - Economics Research Center 92-2, Chicago - Economics Research Center.
  4. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 40(4), pages 1105-1166, December.
  5. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 3-95, Wharton School Rodney L. White Center for Financial Research.
  6. 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, University of Michigan, Michigan Retirement Research Center wp036, University of Michigan, Michigan Retirement Research Center.
  7. Neumark, David & Powers, Elizabeth, 2000. "Welfare for the elderly: the effects of SSI on pre-retirement labor supply," Journal of Public Economics, Elsevier, Elsevier, vol. 78(1-2), pages 51-80, October.
  8. David Neumark & Sanders D. Korenman, 1988. "Does marriage really make men more productive?," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 29, Board of Governors of the Federal Reserve System (U.S.).
  9. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(1), pages 1-61, March.
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Cited by:
  1. Hugo Benítez-Silva & Richard Disney & Sergi Jiménez Martín, 2009. "Disability, Capacity for Work and the Business Cycle: An International Perspective," Working Papers 2009-28, FEDEA.
  2. David Neumark & Elizabeth Powers, 2006. "Supplemental security income, labor supply, and migration," Journal of Population Economics, Springer, Springer, vol. 19(3), pages 447-479, July.
  3. Neumark, David & Powers, Elizabeth T., 2005. "SSI, Labor Supply, and Migration," IZA Discussion Papers 1820, Institute for the Study of Labor (IZA).

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