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Benefit Generosity and the Income Effect on Labor Supply: Quasi-Experimental Evidence

  • Danzer, Alexander M.

This paper uses an unanticipated, exogenous doubling of the legal minimum pension in Ukraine as a unique quasi-experiment to evaluate the income effect on various aspects of labor supply among the elderly. In contrast to previous studies, the unusually simple pension eligibility rule allows estimating a pure causal income effect. Applying difference-indifferences and regression discontinuity methods on two nationally representative data sets yields a retirement elasticity of 0.3. Men and women respond at different margins of labor supply but with similar overall effect. Despite retirement incentives being disproportionally large for low income earners old-age poverty declined significantly.

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Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2011 with number 23.

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Date of creation: 2011
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Handle: RePEc:zbw:gdec11:23
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