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 Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 635.
Date of creation: Jul 1989
Date of revision:
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social security; labor supply; income effect;
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, vol. 10(4), pages 412-37, October.
- Alan B. Krueger & Jorn-Steffen Pischke, 1991. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," NBER Working Papers 3699, National Bureau of Economic Research, Inc.
- 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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boskin, Michael J, 1977. "Social Security and Retirement Decisions," Economic Inquiry, Western Economic Association International, vol. 15(1), pages 1-25, January.
- Kahn, James A., 1988. "Social security, liquidity, and early retirement," Journal of Public Economics, Elsevier, vol. 35(1), pages 97-117, February.
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- Hanoch, Giora & Honig, Marjorie, 1978. "The labor supply curve under income maintenance programs," Journal of Public Economics, Elsevier, vol. 9(1), pages 1-16, February.
- Kathryn Anderson & Richard V. Burkhauser & Joseph F. Quinn, 1986. "Do retirement dreams come true? The effect of unanticipated events on retirement plans," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 39(4), pages 518-526, July.
- Michael D. Hurd & Michael J. Boskin, 1985.
"The Effect of Social Security on Retirement in the Early 1970s,"
NBER Working Papers
0659, National Bureau of Economic Research, Inc.
- Hurd, Michael D & Boskin, Michael J, 1984. "The Effect of Social Security on Retirement in the Early 1970s," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 767-90, November.
- B. Douglas Bernheim, 1987. "Social Security Benefits: An Empirical Study of Expectations and Realizations," NBER Working Papers 2257, National Bureau of Economic Research, Inc.
- Alan S. Blinder & Roger H. Gordon & Donald E. Wise, 1981. "Reconsidering the Work Disincentive Effects of Social Security," NBER Working Papers 0562, National Bureau of Economic Research, Inc.
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