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Social Security, Labor Supply and Health of Older Workers: Quasi-Experimental Evidence from a Large Reform

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  • Saporta-Eksten, Itay

    (Tel Aviv University)

  • Shurtz, Ity

    (Ben Gurion University)

  • Weisburd, Sarit

    (Tel Aviv University)

Abstract

We study the effects of public pension systems on the retirement timing of older workers and, in turn, the health consequences of delaying retirement by those workers. Causal inference relies on a social security reform in Israel that shifted payments from husbands to their (non-working) wives, thereby substantially reducing the implied tax on the husband's employment while keeping overall household wealth constant. Using administrative social security data, we estimate extensive-margin labor supply elasticities w.r.t. the average net-of-tax rate of about 0.43 for men over 65. Using the reform to instrument for employment, we find that working an additional full year at old age decreases longevity. This mortality effect occurs after age 75 and is driven by workers holding blue-collar jobs. Finally, we evaluate the effect of the reform on earnings. The results imply a small value for an additional year of life, suggesting that workers underestimate the health cost of employment at older ages.

Suggested Citation

  • Saporta-Eksten, Itay & Shurtz, Ity & Weisburd, Sarit, 2020. "Social Security, Labor Supply and Health of Older Workers: Quasi-Experimental Evidence from a Large Reform," IZA Discussion Papers 13263, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp13263
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    Cited by:

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    2. Bellés Obrero, Cristina & Jimenez-Martin, Sergi & Ye, Han, 2022. "The Effect of Removing Early Retirement on Mortality," IZA Discussion Papers 15577, Institute of Labor Economics (IZA).
    3. Jäger, Philipp, 2023. "Can pensions save lives? Evidence from the introduction of old-age assistance in the UK," Ruhr Economic Papers 995, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Tomaz Cajner & Javier Fernández-Blanco & Virginia Sánchez-Marcos, 2021. "Widening Health Gap in the U.S. Labor Force Participation at Older Ages," Working Papers 1298, Barcelona School of Economics.
    5. Nir Jaimovich, 2021. "Comment on "Shocks, Institutions, and Secular Changes in Employment of Older Individuals"," NBER Chapters, in: NBER Macroeconomics Annual 2021, volume 36, pages 217-233, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    labor supply; social security; tax reform; health; mortality;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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