Working Paper: CEPR ID: DP14769
Authors: Itay Saporta-Eksten; Ity Shurtz; Sarit Weisburd
Abstract: We study the effects of public pension systems on the retirement timing of older workers and, in turn, the health consequences of delaying retirement by those workers. Causal inference relies on a social security reform in Israel that shifted payments from husbands to their (non-working) wives, thereby substantially reducing the implied tax on the husband’s employment while keeping overall household wealth constant. Using administrative social security data, we estimate extensive-margin labor supply elasticities w.r.t. the average net-of-tax rate of about 0.43 for men over 65. Using the reform to instrument for employment, we find that working an additional full year at old age decreases longevity. This mortality effect occurs after age 75 and is driven by workers holding blue-collar jobs. Finally, we evaluate the effect of the reform on earnings. The results imply a small value for an additional year of life, suggesting that workers underestimate the health cost of employment at older ages.
Keywords: labor supply; social security; tax reform; health; mortality
JEL Codes: J10; J26; J22; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Health costs of employment at older ages (J32) | labor supply decisions (J22) |
| Working an additional year past age 75 (J26) | longevity (C41) |
| Social security reform (H55) | retirement rates of husbands (J26) |
| Social security reform (H55) | labor supply of husbands (J22) |
| Social security reform (H55) | health outcomes of older workers (J26) |