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

40 Pages Posted: 7 Jan 2008 Last revised: 12 Aug 2010

See all articles by Alan B. Krueger

Alan B. Krueger

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Jörn-Steffen Pischke

London School of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: May 1991

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 1970s and 1980s. The analysis focuses on the 1977 amendments to the Social Security Act t which created a substantial t 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 t 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 t 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.

Suggested Citation

Krueger, Alan B. and Pischke, Jörn-Steffen (Steve), The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation (May 1991). NBER Working Paper No. w3699. Available at SSRN: https://ssrn.com/abstract=480209

Alan B. Krueger (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
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609-258-4046 (Phone)
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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Jörn-Steffen (Steve) Pischke

London School of Economics ( email )

Houghton Street
London WC2A 2AE
+44 207 955 6509 (Phone)
+44 207 955 7595 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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