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

  • David Neumark
  • Elizabeth T. Powers

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.

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File URL: http://www.nber.org/papers/w9851.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9851.

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Date of creation: Jul 2003
Date of revision:
Publication status: published as Public Finance Review, Vol. 33, no. 1 (January 2005): 3-35
Handle: RePEc:nbr:nberwo:9851
Note: AG LS
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  1. David Neumark & Sanders D. Korenman, 1988. "Does marriage really make men more productive?," Finance and Economics Discussion Series 29, Board of Governors of the Federal Reserve System (U.S.).
  2. 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.
  3. 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.
  4. Daniel, K., 1991. "Does Marriage Make Men More Productive?," University of Chicago - Economics Research Center 92-2, Chicago - Economics Research Center.
  5. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
  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. 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 360-99, April.
  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. 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.
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