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Why are older men working more? The role of social security

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  • Yu, Zhixiu

Abstract

This paper investigates the role of Social Security reforms in explaining the increase in labor supply of older men across cohorts and evaluates the labor response by health status. I develop and estimate a rich dynamic life-cycle model of labor supply, savings, and Social Security application that captures the key structure of Social Security retirement benefits, disability insurance, and pension systems, while accounting for uncertainties in health, survival, wages, and medical expenditures. The model matches well the observed life-cycle profiles of employment, hours per worker, and savings for men in the 1930s cohort from the Panel Study of Income Dynamics. I find that Social Security reforms account for over 77% of the observed rises in employment and hours worked by the 1950s cohort, with the retirement earnings test reforms being the most important. The labor response is smaller for unhealthy individuals due to the work disincentives provided by disability benefits.

Suggested Citation

  • Yu, Zhixiu, 2024. "Why are older men working more? The role of social security," Journal of Public Economics, Elsevier, vol. 231(C).
    • Handle: RePEc:eee:pubeco:v:231:y:2024:i:c:s0047272724000070
    DOI: 10.1016/j.jpubeco.2024.105071
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    More about this item

    Keywords

    Social security reform; Retirement; Labor force participation; Health; Older workers;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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