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The Effects of Changes in State SSI Supplements on Pre-Retirement Labor Supply

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  • David Neumark
  • Elizabeth T. Powers

Abstract

Because the Supplemental Security Income (SSI) program is means-tested, with both income limits and asset limits, those on the margin of eligibility for the elderly component of the program face incentives to reduce labor supply (or earnings) prior to becoming eligible. Our past research relying on cross-state variation in SSI benefits found evidence consistent with the predicted negative labor supply effects. However, a reliance on cross-state variation necessitated reliance on less-than-ideal control samples. In contrast, this paper uses CPS data covering a 22-year period, which permit identification of the effects of SSI from within-state, time-series variation in SSI benefits, using a better control sample. The evidence points consistently to negative effects of more generous SSI payments on the labor supply of likely SSI participants aged 62-64. The implied elasticities of labor supply with respect to benefits, for those with a high probability of SSI participation, are generally in the range of 0.2 to 0.3, looking at both employment and hours of work.

Suggested Citation

  • David Neumark & Elizabeth T. Powers, 2003. "The Effects of Changes in State SSI Supplements on Pre-Retirement Labor Supply," NBER Working Papers 9851, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9851
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    References listed on IDEAS

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    1. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
    2. Neumark, David & Powers, Elizabeth, 2000. "Welfare for the elderly: the effects of SSI on pre-retirement labor supply," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 51-80, October.
    3. Daniel, K., 1991. "Does Marriage Make Men More Productive?," University of Chicago - Economics Research Center 92-2, Chicago - Economics Research Center.
    4. Sanders Korenman & David Neumark, 1991. "Does Marriage Really Make Men More Productive?," Journal of Human Resources, University of Wisconsin Press, vol. 26(2), pages 282-307.
    5. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-399, April.
    6. Mitchell, Olivia S, 1988. "Worker Knowledge of Pension Provisions," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 21-39, January.
    7. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
    8. Neumark, David & Powers, Elizabeth, 1998. "The effect of means-tested income support for the elderly on pre-retirement saving: evidence from the SSI program in the U.S," Journal of Public Economics, Elsevier, vol. 68(2), pages 181-206, May.
    9. Elizabeth T. Powers & David Neumark, 2003. "The Supplemental Security Income Program and Incentives to Claim Social Security Retirement Early: Empirical Evidence from Matched SIPP and Social Security Administrative Files," Working Papers wp036, University of Michigan, Michigan Retirement Research Center.
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    Cited by:

    1. Neumark, David & Powers, Elizabeth T., 2005. "SSI, Labor Supply, and Migration," IZA Discussion Papers 1820, Institute for the Study of Labor (IZA).
    2. Hugo Benítez-Silva & Richard Disney & Sergi Jiménez-Martín, 2010. "Disability, capacity for work and the business cycle: an international perspective," Economic Policy, CEPR;CES;MSH, vol. 25, pages 483-536, July.
    3. Hugo Benitez-Silva & Moshe Buchinsky & John Rust, 2005. "Induced Entry Effects of a $1 for $2 Offset in SSDI Benefits," Department of Economics Working Papers 05-03, Stony Brook University, Department of Economics.
    4. David Neumark & Elizabeth Powers, 2006. "Supplemental security income, labor supply, and migration," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(3), pages 447-479, July.

    More about this item

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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