The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation

Author
Keywords
Abstract

This paper uses aggregate birth year/calendar year level data derived
from the Current Population Survey (CPS) to estimate the effect of Social
Security wealth on the labor supply of older men in the l970s and 1980s.
The analysis focuses on the 1977 amendments to the Social Security Act
which lead to a substantial, unanticipated differential in benefits for
otherwise identical individuals depending on whether they were born before
or after 1917. This differential has become known as the benefit notch.
There are two principal differences between the present analysis and the
previous literature. First, this paper uses time-series variations in
benefit levels to estimate the relationship between benefits and labor
supply in an era when real benefits were falling for new recipients.
Second, variation in benefit levels across cohorts is used to estimate the
relationship between benefits and labor supply. The results support a
conclusion that labor supply continued to decline for the "notch babies"
who received lower Social Security benefits than earlier cohorts.

Year of Publication
1989
Number
255
Date Published
07/1989
Publication Language
eng
Citation Key
Journal of Labor Economics, Vol 10, no.2, October, 1992
URL
Working Papers