Working Paper: NBER ID: w14462
Authors: Dora L. Costa
Abstract: I examine the effects of an unearned income transfer on the retirement rates and living arrangements of a very poor population by studying the effects of pensions on the decisions of black Union Army veterans. I find that blacks were 2 to 5 times as responsive as whites to income transfers in their retirement decisions and 6 to 8 times as responsive in their choice of independent living arrangements. I argue that blacks' greater poverty explains their responsiveness to pensions. My findings have implications for understanding racial differences in trends in retirement and independent living. I show that the retirement rates of both blacks and whites rose between 1900 and 1930 but that convergence in black and white rates and in living arrangements only occurred between 1930 and 1950. I argue that income effects from the institution of Social Security explain up to half of the convergence in black-white retirement rates and in living arrangements.
Keywords: Retirement; Pensions; African Americans; Social Security
JEL Codes: J14; J26; N31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Pension income (H55) | Labor supply (J22) |
| Law under which pensions were granted (H55) | Pension receipt (H55) |
| Pension income (H55) | Retirement decisions (J26) |
| Pension income (H55) | Retirement rates for black veterans (J26) |
| Pension income (H55) | Living arrangements of black veterans (R21) |
| Pension income (H55) | Headship rates among black retirees (J26) |
| Age thresholds for pension amounts (H55) | Retirement rates (J26) |