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The Effect of Social Security on Retirement

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  • Anthony J. Pellechio
Abstract
This study examines the impact of social security on the retirement of married men aged 60-70 years. The empirical results are based on a rich file of data from the Social Security Administration (1973 CPS-IRS-SSA Exact Match File). The data permit precise calculation of social security wealth (the actuarial present value of benefits that a person would receive by retiring) denoted SSW. This variable measures social security's effect on retirement. The estimated effects are significant and considerable. When SSW in-creases from $35,000 to $55,000 the probability of retirement rises by .15 for 62-64 year olds relative to a .41 retirement rate. For 65-70 year olds this increase is .22 relative to .78. For 60-61 year olds who are entitled to SSW but not old enough to receive benefits the estimated effect was small and insignificant. This supports the conclusion that the observed effect on men eligible for benefits is a causal relationship. The traditional method of comparing market and reservation wages for analyzing the decision to work provides the basic econometric model. SSW is added to construct a retirement model. A two-step probit analysis is developed to identify structural parameters in the retirement model.

Suggested Citation

  • Anthony J. Pellechio, 1978. "The Effect of Social Security on Retirement," NBER Working Papers 0260, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0260
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    References listed on IDEAS

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    1. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
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    Cited by:

    1. Ekaterina A. Klepikova, 2015. "Estimating the Relationship between Health and Employment of Russian People in Pensionable Age," HSE Working papers WP BRP 100/EC/2015, National Research University Higher School of Economics.
    2. repec:eee:labchp:v:1:y:1986:i:c:p:305-355 is not listed on IDEAS
    3. Olivia S. Mitchell & Gary S. Fields, 1981. "The Effects of Pensions and Earnings on Retirement: A Review Essay," NBER Working Papers 0772, National Bureau of Economic Research, Inc.
    4. Richard B. Freeman & John T. Dunlop & R. F. Schubert, 1980. "The Evolution of the American Labor Market, 1948-80," NBER Chapters, in: The American Economy in Transition, pages 349-414, National Bureau of Economic Research, Inc.
    5. Barbara L. Wolfe, 1985. "Cutbacks in Disability Transfer Programs," Evaluation Review, , vol. 9(3), pages 263-280, June.
    6. Richard B. Freeman, 1980. "The Evolution of the American Labor Market 1948-1980," NBER Working Papers 0446, National Bureau of Economic Research, Inc.
    7. Frederic P. Slade, 1982. "Labor Force Entry and Exit of Older Men: A Longitudinal Study," NBER Working Papers 1029, National Bureau of Economic Research, Inc.

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