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The Effect of Old Age Assistance on Retirement

  • Leora Friedberg

Researchers have devoted considerable attention to analyzing the impact of Social Security on retirement, with mixed findings. However, Old Age Assistance (OAA), a means-tested program established at the same time, dwarfed Social Security until the 1950s and coincided with the early decline in elderly participation. In addition, OAA benefit levels were determined by the states - a key source of policy variation that is missing in the case of Social Security. I estimate the relationship between OAA benefit levels and elderly labor force participation using individual data from the 1940 and 1950 Censuses. The effect of OAA is found to be strong and implies that participation would have risen slightly instead of falling if benefits had not been raised during the 1940s. I also present evidence against the endogeneity of state benefit levels.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6548.

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Date of creation: May 1998
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Publication status: published as Journal of Public Economics, Vol. 71, no. 2 (February 1999): 213-252.
Handle: RePEc:nbr:nberwo:6548
Note: AG PE
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