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The Effects of Changes in State SSI Supplements on Preretirement Labor Supply

  • David Neumark

    (Public Policy Institute of California and National Bureau of Economic Research)

  • Elizabeth T. Powers

    (University of Illinois at Urbana-Champaign)

Because the Supplemental Security Income (SSI) program has 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 prior to becoming eligible. The authors’ past research relying on cross-state variation in SSI benefits found evidence of negative labor supply effects. However, a reliance on cross-state variation implied less than ideal control samples. In contrast, this article uses CPS data covering a twenty-two-year period, which permits identifying 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 sixty-two to sixty-four. For those with a high probability of SSI participation, the implied elasticities of employment and hours with respect to benefits are generally in the range of -0.2 to -0.3.

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File URL: http://pfr.sagepub.com/content/33/1/3.abstract
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Article provided by in its journal Public Finance Review.

Volume (Year): 33 (2005)
Issue (Month): 1 (January)
Pages: 3-35

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Handle: RePEc:sae:pubfin:v:33:y:2005:i:1:p:3-35
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  1. R. Glenn Hubbard & Jonathan Skinner & Stephen P. Zeldes, 1994. "Precautionary Saving and Social Insurance," NBER Working Papers 4884, National Bureau of Economic Research, Inc.
  2. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
  3. 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.
  4. Mitchell, Olivia S, 1988. "Worker Knowledge of Pension Provisions," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 21-39, January.
  5. David Neumark & Sanders D. Korenman, 1988. "Does marriage really make men more productive?," Finance and Economics Discussion Series 29, Board of Governors of the Federal Reserve System (U.S.).
  6. Neumark, David & Powers, Elizabeth, 2000. "Welfare for the elderly: the effects of SSI on pre-retirement labor supply," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 51-80, October.
  7. 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.
  8. 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.
  9. Daniel, K., 1991. "Does Marriage Make Men More Productive?," University of Chicago - Economics Research Center 92-2, Chicago - Economics Research Center.
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