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Social Security and Elderly Living Arrangements: Evidence from the Social Security Notch

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  • Gary V. Engelhardt
  • Jonathan Gruber
  • Cynthia D. Perry

Abstract

Previous studies of the effect of Social Security on elderly living arrangements generally have relied on data from the distant past or differences in benefits across families or cohorts that potentially were correlated with other determinants of living arrangements. Using data from the 1980–99 Current Population Surveys, we attempt to isolate the causal effect of Social Security on living arrangements with an instrumental-variable approach that relies on the large shifts in benefits for cohorts born from 1910–21, the socalled Social Security notch. Over all elderly households, the estimated elasticity of living with others with respect to Social Security income is -0.4, with elasticities of -1.3 and -1.4 for the widowed and divorced, respectively; most of the effects on living arrangements appear to be concentrated among the lesser educated as well. Our estimated elasticities are substantially larger than those from previous studies and suggest that reductions in current benefits would alter living arrangements significantly.

Suggested Citation

  • Gary V. Engelhardt & Jonathan Gruber & Cynthia D. Perry, 2005. "Social Security and Elderly Living Arrangements: Evidence from the Social Security Notch," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
  • Handle: RePEc:uwp:jhriss:v:40:y:2005:i:2:p354-372
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    References listed on IDEAS

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    1. Axel Borsch-Supan & Vassilis Hajivassiliou & Laurence J. Kotlikoff, 1992. "Health, Children, and Elderly Living Arrangements: A Multiperiod-Multinomial Probit Model with Unobserved Heterogeneity and Autocorrelated Errors," NBER Chapters,in: Topics in the Economics of Aging, pages 79-108 National Bureau of Economic Research, Inc.
    2. Costa, Dora L, 1997. "Displacing the Family: Union Army Pensions and Elderly Living Arrangements," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1269-1292, December.
    3. Ellen Kramarow, 1995. "The elderly who live alone in the united states: Historical perspectives on household change," Demography, Springer;Population Association of America (PAA), vol. 32(3), pages 335-352, August.
    4. Frances Kobrin, 1976. "The fall in household size and the rise of the primary individual in the United States," Demography, Springer;Population Association of America (PAA), vol. 13(1), pages 127-138, February.
    5. Kathleen Mcgarry & Robert Schoeni, 2000. "Social security, economic growth, and the rise in elderly widows’ independence in the twentieth century," Demography, Springer;Population Association of America (PAA), vol. 37(2), pages 221-236, May.
    6. Diane Macunovich & Richard Easterlin & Christine Schaeffer & Eileen Crimmins, 1995. "Echoes of the baby boom and bust: Recent and prospective changes in living alone among elderly widows in the united states," Demography, Springer;Population Association of America (PAA), vol. 32(1), pages 17-28, February.
    7. Robert Michael & Victor Fuchs & Sharon Scott, 1980. "changes in the propensity to live alone: 1950–1976," Demography, Springer;Population Association of America (PAA), vol. 17(1), pages 39-56, February.
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