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American Economic Review Vol. 108 No. 8 2018

Government Old-Age Support and Labor Supply: Evidence from the Old Age Assistance Program

Daniel K. Fetter1; Lee M. Lockwood2

1 Department of Economics, Wellesley College, 106 Central Street, Wellesley MA 02481, and NBER (email: ) · 2 Department of Economics, University of Virginia, 248 McCormick Road, Charlottesville, VA 22903, and NBER (email: )

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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.

DOI
10.1257/aer.20160921
Volume
108
Issue
8
Pages
2174-2211
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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