Government Old-Age Support and Labor Supply: Evidence from the Old Age Assistance Program
American Economic Review
vol. 108,
no. 8, August 2018
(pp. 2174-2211)
(Complimentary)
Abstract
Many government programs transfer resources to older people and implicitly or explicitly tax their labor. We shed new light on the labor supply and welfare effects of such programs by investigating the Old Age Assistance Program (OAA). Exploiting the large differences in OAA programs across states and Census data on the entire US population in 1940, we find that OAA reduced the labor force participation rate among men aged 65-74 by 8.5 percentage points, more than one-half of its 1930-1940 decline, but that OAA's implicit taxation of earnings imposed only small welfare costs on recipients.Citation
Fetter, Daniel K., and Lee M. Lockwood. 2018. "Government Old-Age Support and Labor Supply: Evidence from the Old Age Assistance Program." American Economic Review, 108 (8): 2174-2211. DOI: 10.1257/aer.20160921Additional Materials
JEL Classification
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H55 Social Security and Public Pensions
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
- J22 Time Allocation and Labor Supply