The Impact of Income on Mortality: Evidence from the Social Security Notch

There is widespread and longstanding agreement that life expectancy and income are positively correlated. However, it has proven much more difficult to establish a causal relationship since income and health are jointly determined. We use a major change in the Social Security law as exogenous variation in income to examine the impact of income on mortality in an elderly population. The legislation created a notch' in Social Security benefits based upon date of birth; those born before January 1, 1917 generally receive higher benefits than those born afterwards. We compare mortality rates after age 65 for males born in the second half of 1916 and the first half of 1917. Data from restricted-use versions of the National Mortality Detail File combined with Census data allows us to count all deaths among elderly Americans between 1979 and 1993. We find that the higher income group has a statistically significantly higher mortality rate, contradicting the previous literature. We also find that the younger cohort responded to lower incomes by increasing post-retirement work effort. These results suggest that moderate employment has beneficial health effects for the elderly.