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Welfare for the elderly: the effects of SSI on pre-retirement labor supply

  • Neumark, David
  • Powers, Elizabeth

The elderly are one of the exceptional groups in American society with access to a significant cash safety net, a means-tested program called Supplemental Security Income (SSI). Little attention has been paid to the pre-eligibility-age labor market disincentives created by such a program. In particular, asset and income limits might induce individuals nearing the eligibility age to work less. There is little if any hard evidence on such incentive effects. We exploit variation in states' supplementation of the federal SSI benefit to estimate the effects of the SSI program on pre-retirement labor supply, using data from the 1984, 1990, and 1991 panels of the Survey of Income and Program Participation. We find some evidence that generous SSI benefits reduce the pre-retirement labor supply (and earnings) of men who are likely to participate in SSI after retirement as they near the eligibility age, especially that of men who have reached the age of eligibility for early Social Security benefits, which may be used to offset their reduced labor income.

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File URL: http://www.sciencedirect.com/science/article/B6V76-410MHCN-4/2/95623118d75f0929eeabd6a667ee5ee6
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 78 (2000)
Issue (Month): 1-2 (October)
Pages: 51-80

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Handle: RePEc:eee:pubeco:v:78:y:2000:i:1-2:p:51-80
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Mitchell, Olivia S & Zeldes, Stephen P, 1996. "Social Security Privatization: A Structure for Analysis," American Economic Review, American Economic Association, vol. 86(2), pages 363-67, May.
  2. Besley, Timothy & Case, Anne, 2000. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," Economic Journal, Royal Economic Society, vol. 110(467), pages F672-94, November.
  3. R. Glenn Hubbard & Jonathan Skinner & Stephen P. Zeldes, 1994. "Precautionary Saving and Social Insurance," NBER Working Papers 4884, National Bureau of Economic Research, Inc.
  4. Johnson, Richard W & Neumark, David, 1996. "Wage Declines among Older Men," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 740-48, November.
  5. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  6. Neumark, David & Powers, Elizabeth, 1998. "The effect of means-tested income support for the elderly on pre-retirement saving: evidence from the SSI program in the U.S," Journal of Public Economics, Elsevier, vol. 68(2), pages 181-206, May.
  7. Powers, Elizabeth T., 1998. "Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States," Journal of Public Economics, Elsevier, vol. 68(1), pages 33-53, April.
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