Monthly Archives: June 2014

THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: SUMMARY AND CONCLUSIONS

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This paper explores whether the Old Age Assistance program, the first means tested transfer program for the elderly, induced individuals to retire from work. OAA was strongly means-tested, benefit levels were generous relative to income levels of the day, and OAA recipiency rates were high. Using individual records from the 1940 and 1950 Censuses, I […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: EMPIRICAL RESULTS 6

The estimates also indicate that farm residents were more than a third less sensitive to OAA than the rest of the population. This is consistent with Fisher (1946), who reported that, while 22% of the aged population were farm residents in 1940, only 16% of OAA recipients were farm residents in the twenty-two states studied […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: EMPIRICAL RESULTS 5

Additional Results This section exploits the individual level data available in the Censuses to show that some groups of the population were more sensitive to OAA than others. It may not be obvious, though, why the impact of OAA should differ across demographic groups. We do expect OAA to have a bigger impact on individuals […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: EMPIRICAL RESULTS 4

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Implications for Social Security Researchers have had surprising difficulty connecting the tremendous growth in the Social Security program to rising retirement rates. Although the estimates in this paper are derived from OAA, they offer a means to extrapolate to Social Security’s impact on early retirement trends. Both OAA and Social Security were earnings tested income […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: EMPIRICAL RESULTS 3

Endogenous Legislation Endogenous benefit levels would make the estimates reported here inconsistent. OAA benefits and participation may be associated not because rising benefits induced people to leave the labor force, but instead because rising retirement rates led states to raise support levels in response. Yet, it is difficult to come up with useful and available […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: EMPIRICAL RESULTS 2

More importantly, the individual variables, except for age, are interacted with the OAA benefit, which allows the impact of OAA to vary across groups in the population. The interaction terms, which will be analyzed in more detail later, are jointly highly significant and improve the fit of the estimation considerably. With the interaction terms, the […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: EMPIRICAL RESULTS

In this section I present estimates of the effect of OAA on labor force participation and offer evidence against the potential endogeneity of state benefit levels. I also discuss the implications of the estimates for early expansions in Social Security, and I conclude by analyzing how OAA affected people with different personal characteristics. Estimates of […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: EMPIRICAL APPROACH AND DATA

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The empirical model in this paper will take the following form: Equation (2) will be estimated as a probit. The index i refers to the individual, s to his state of residence, and t to the year. LFP takes a value of one if the individual participates in the labor force and zero if he […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: LABOR FORCE PARTICIPATION OF THE AGED

This paper focuses on explaining the variation across states in labor force participation trends between 1940 and 1950. An alternative strategy would study the labor supply response to OAA’s introduction in the 1930s. However, there are two reasons for emphasizing the 1940s instead. First, only state level aggregates are available from the 1930 Census. In […]

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THE EFFECT OF OLD AGE ASSISTANCE ON RETIREMENT: OLD AGE ASSISTANCE 3

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However, actual patterns of benefit levels, participation, and average income suggest that this potential source of spurious benefit changes is not a major problem. Average benefits B rose between 1940 and 1950. If trends in income Y influenced B more than statutory changes in Bmax did, it must be that income among the poor elderly […]

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