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The Rise of Retirement Among African Americans: Wealth and Social Security Effects

  • Dora L. Costa

I examine the effects of an unearned income transfer on the retirement rates and living arrangements of a very poor population by studying the effects of pensions on the decisions of black Union Army veterans. I find that blacks were 2 to 5 times as responsive as whites to income transfers in their retirement decisions and 6 to 8 times as responsive in their choice of independent living arrangements. I argue that blacks' greater poverty explains their responsiveness to pensions. My findings have implications for understanding racial differences in trends in retirement and independent living. I show that the retirement rates of both blacks and whites rose between 1900 and 1930 but that convergence in black and white rates and in living arrangements only occurred between 1930 and 1950. I argue that income effects from the institution of Social Security explain up to half of the convergence in black-white retirement rates and in living arrangements.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14462.

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Date of creation: Nov 2008
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Handle: RePEc:nbr:nberwo:14462
Note: AG DAE LS PE
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  1. Robert Barsky & John Bound & Kerwin Charles & Joseph Lupton, 2001. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," NBER Working Papers 8466, National Bureau of Economic Research, Inc.
  2. Margo, Robert A, 1984. "Accumulation of Property by Southern Blacks before World War I: Comment and Further Evidence," American Economic Review, American Economic Association, vol. 74(4), pages 768-76, September.
  3. Case, A. & Deaton, A., 1996. "Large Cash Transfers to the Elderly in South Africa," Papers 176, Princeton, Woodrow Wilson School - Development Studies.
  4. Costa, Dora L, 1995. "Pensions and Retirement: Evidence from Union Army Veterans," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 297-319, May.
  5. Erik Hurst & Ming Ching Luoh & Frank P. Stafford, 1998. "The Wealth Dynamics of American Families, 1984-94," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 267-338.
  6. Kathleen McGarry & Robert F. Schoeni, 1998. "Social Security, Economic Growth, and the Rise in Independence of Elderly Widows in the 20th Century," NBER Working Papers 6511, National Bureau of Economic Research, Inc.
  7. Bound, John, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," American Economic Review, American Economic Association, vol. 79(3), pages 482-503, June.
  8. Smith, James P, 1984. "Race and Human Capital," American Economic Review, American Economic Association, vol. 74(4), pages 685-98, September.
  9. Lange, Fabian & Olmstead, Alan L. & Rhode, Paul W., 2009. "The Impact of the Boll Weevil, 1892–1932," The Journal of Economic History, Cambridge University Press, vol. 69(03), pages 685-718, September.
  10. Eric V. Edmonds & Kristin Mammen & Douglas L. Miller, 2005. "Rearranging the Family?: Income Support and Elderly Living Arrangements in a Low-Income Country," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
  11. Jeffrey B. Liebman, 2002. "Redistribution in the Current U.S. Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 11-48 National Bureau of Economic Research, Inc.
  12. Edward N. Wolff, 1998. "Recent Trends in the Size Distribution of Household Wealth," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 131-150, Summer.
  13. 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 1269-92, December.
  14. Dora L. Costa, 1999. "A House of Her Own: Old Age Assistance and the Living Arrangements of Older Nonmarried Women," NBER Working Papers 6217, National Bureau of Economic Research, Inc.
  15. Hurd, Michael D & Boskin, Michael J, 1984. "The Effect of Social Security on Retirement in the Early 1970s," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 767-90, November.
  16. William J.Collins & Robert A. Margo, 2000. "Race and Home Ownership: A Century-Long View," Vanderbilt University Department of Economics Working Papers 0012, Vanderbilt University Department of Economics.
  17. Bert Kestenbaum, 1992. "A description of the extreme aged population based on improved medicare enrollment data," Demography, Springer, vol. 29(4), pages 565-580, November.
  18. Cally Ardington & Anne Case & Victoria Hosegood, 2007. "Labor Supply Responses To Large Social Transfers: Longitudinal Evidence From South Africa," Working Papers 1003, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  19. Smith, James P & Welch, Finis R, 1989. "Black Economic Progress after Myrdal," Journal of Economic Literature, American Economic Association, vol. 27(2), pages 519-64, June.
  20. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2009. "Conspicuous Consumption and Race," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 425-467, May.
  21. Friedberg, Leora, 1999. "The effect of old age assistance on retirement," Journal of Public Economics, Elsevier, vol. 71(2), pages 213-232, February.
  22. Vimal Ranchhod, 2006. "The Effect Of The South African Old Age Pension On Labour Supply Of The Elderly," South African Journal of Economics, Economic Society of South Africa, vol. 74(4), pages 725-744, December.
  23. de Carvalho Filho, Irineu Evangelista, 2008. "Old-age benefits and retirement decisions of rural elderly in Brazil," Journal of Development Economics, Elsevier, vol. 86(1), pages 129-146, April.
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