IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/0260.html
   My bibliography  Save this paper

The Effect of Social Security on Retirement

Author

Listed:
  • Anthony J. Pellechio

Abstract

This study examines the impact of social security on the retirement of married men aged 60-70 years. The empirical results are based on a rich file of data from the Social Security Administration (1973 CPS-IRS-SSA Exact Match File). The data permit precise calculation of social security wealth (the actuarial present value of benefits that a person would receive by retiring) denoted SSW. This variable measures social security's effect on retirement. The estimated effects are significant and considerable. When SSW in-creases from $35,000 to $55,000 the probability of retirement rises by .15 for 62-64 year olds relative to a .41 retirement rate. For 65-70 year olds this increase is .22 relative to .78. For 60-61 year olds who are entitled to SSW but not old enough to receive benefits the estimated effect was small and insignificant. This supports the conclusion that the observed effect on men eligible for benefits is a causal relationship. The traditional method of comparing market and reservation wages for analyzing the decision to work provides the basic econometric model. SSW is added to construct a retirement model. A two-step probit analysis is developed to identify structural parameters in the retirement model.

Suggested Citation

  • Anthony J. Pellechio, 1978. "The Effect of Social Security on Retirement," NBER Working Papers 0260, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0260
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w0260.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    2. Martin Feldstein, 1980. "Social Security, Induced Retirement, and Aggregate Capital Accumulation:A Correction and Updating," NBER Working Papers 0579, National Bureau of Economic Research, Inc.
    3. Boskin, Michael J, 1977. "Social Security and Retirement Decisions," Economic Inquiry, Western Economic Association International, vol. 15(1), pages 1-25, January.
    4. Campbell, Colin D & Campbell, Rosemary G, 1976. "Conflicting Views on the Effect of Old-Age and Survivors Insurance on Retirement," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 369-388, September.
    5. Rosett, Richard N & Nelson, Forrest D, 1975. "Estimation of the Two-Limit Probit Regression Model," Econometrica, Econometric Society, vol. 43(1), pages 141-146, January.
    6. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    7. Reuben Gronau, 1974. "The Effect of Children on the Housewife's Value of Time," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 457-490, National Bureau of Economic Research, Inc.
    8. Martin Feldstein & Anthony J. Pellechio, 1980. "Social Security and Household Wealth Accumulation: New Microeconomic Evidence," NBER Working Papers 0206, National Bureau of Economic Research, Inc.
    9. Kotlikoff, Laurence J, 1979. "Testing the Theory of Social Security and Life Cycle Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 396-410, June.
    10. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-694, July.
    11. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    12. R. E. Hall, 1970. "Wages, Income and Hours of Work in the U. S. Labor Force," Working papers 62, Massachusetts Institute of Technology (MIT), Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ekaterina A. Klepikova, 2015. "Estimating the Relationship between Health and Employment of Russian People in Pensionable Age," HSE Working papers WP BRP 100/EC/2015, National Research University Higher School of Economics.
    2. repec:eee:labchp:v:1:y:1986:i:c:p:305-355 is not listed on IDEAS
    3. Olivia S. Mitchell & Gary S. Fields, 1981. "The Effects of Pensions and Earnings on Retirement: A Review Essay," NBER Working Papers 0772, National Bureau of Economic Research, Inc.
    4. Richard B. Freeman & John T. Dunlop & R. F. Schubert, 1980. "The Evolution of the American Labor Market, 1948-80," NBER Chapters, in: The American Economy in Transition, pages 349-414, National Bureau of Economic Research, Inc.
    5. Barbara L. Wolfe, 1985. "Cutbacks in Disability Transfer Programs," Evaluation Review, , vol. 9(3), pages 263-280, June.
    6. Richard B. Freeman, 1980. "The Evolution of the American Labor Market 1948-1980," NBER Working Papers 0446, National Bureau of Economic Research, Inc.
    7. Frederic P. Slade, 1982. "Labor Force Entry and Exit of Older Men: A Longitudinal Study," NBER Working Papers 1029, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anthony J. Pellechio, 1981. "Social Security and the Decision to Retire," NBER Working Papers 0734, National Bureau of Economic Research, Inc.
    2. Anthony J. Pellechio, 1978. "The Social Security Earnings Test, Labor Supply Distortions, and Foregone Payroll Tax Revenues," NBER Working Papers 0272, National Bureau of Economic Research, Inc.
    3. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, "undated". "The Evolution of Retirement," Working Papers 2005-03, FEDEA.
    4. R. Glenn Hubbard, 1984. "'Precautionary' Saving Revisited: Social Security, Individual Welfare, and the Capital Stock," NBER Working Papers 1430, National Bureau of Economic Research, Inc.
    5. Olivia S. Mitchell & Gary S. Fields, 1981. "The Effects of Pensions and Earnings on Retirement: A Review Essay," NBER Working Papers 0772, National Bureau of Economic Research, Inc.
    6. Martin Feldstein, 1982. "The Welfare Cost of Social Security's Impact on Private Saving," NBER Working Papers 0969, National Bureau of Economic Research, Inc.
    7. Louis Dicks-Mireaux & Mervyn A. King, 1982. "Pension Wealth and Household Savings: Tests of Robustness," NBER Working Papers 0962, National Bureau of Economic Research, Inc.
    8. Marc Robinson, 1983. "Social Security and Physical Capital: An Interpretation of the Evidence, Lessons and Outlook," UCLA Economics Working Papers 307, UCLA Department of Economics.
    9. B. Douglas Bernheim, 1984. "Life Cycle Annuity Valuation," NBER Working Papers 1511, National Bureau of Economic Research, Inc.
    10. Boskin, Michael J. & Hurd, Michael D., 1978. "The effect of social security on early retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 361-377, December.
    11. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.
    12. Martin Feldstein, 1983. "Social Security Benefits and the Accumulation of Pre-retirement Wealth," International Economic Association Series, in: Franco Modigliani & Richard Hemming (ed.), The Determinants of National Saving and Wealth, chapter 1, pages 3-23, Palgrave Macmillan.
    13. Lopez Murphy, Pablo & Musalem, Alberto R., 2004. "Pension funds and national saving," Policy Research Working Paper Series 3410, The World Bank.
    14. Alexey Zamnius & Andrey Polbin, 2021. "Estimating intertemporal elasticity of substitution of labor supply for married women in Russia," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 64, pages 23-48.
    15. Seng-Eun Choi, 2010. "Social Security and Household Saving in Korea: Evidence from the Household Income and Expenditure Survey," Korean Economic Review, Korean Economic Association, vol. 26, pages 97-119.
    16. Martin Feldstein, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 303-320.
    17. Feldstein, Martin, 1978. "Do private pensions increase national savings?," Journal of Public Economics, Elsevier, vol. 10(3), pages 277-293, December.
    18. Michael J. Boskin & Lawrence J. Lau, 1977. "Taxation and Aggregate Factor Supply: Preliminary Estimates," NBER Working Papers 0221, National Bureau of Economic Research, Inc.
    19. Lange, Mark Dale, 1979. "An economic analysis of time allocation and capitol-labor ratios in household production of farm families in Iowa," ISU General Staff Papers 197901010800008285, Iowa State University, Department of Economics.
    20. Michael J. Boskin, 1987. "Concepts and Measures of Federal Deficits and Debt and Their Impact on Economic Activity," NBER Working Papers 2332, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0260. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.