Working Paper: NBER ID: w31979
Authors: Axel H. Börsch-Supan; Courtney Coile
Abstract: The International Social Security (ISS) project compares the experiences of a dozen developed countries to study Social Security Programs and Retirement Around the World. The project was launched in the mid 1990s and was motivated by decades of decline in the labor force participation rate of older men. The first phases of the project documented that social security program provisions can create powerful incentives for retirement that are strongly correlated with the labor force behavior of older workers. Since then, the dramatic decline in men’s labor force participation has been replaced by sharply rising participation rates. Older women’s participation has increased dramatically as well. \nThis tenth phase of the International Social Security (ISS) Project is the third step in explaining rising participation at older ages. The first step investigated changes in health and education as potential causes and showed that they could not account for the extent of changes in labor force participation. As a second step, we documented that countries have undertaken numerous reforms of their social security programs, disability programs, and other public benefit programs available to older workers. We found that these reforms substantially reduced the implicit tax on work at older ages and that stronger financial incentives to work were positively correlated with labor force participation at older ages. In this volume, the third step of our analysis, we exploit the time-series and cross-national variation in the timing and extent of reforms of retirement incentives and employ micro-econometric methods in order to study whether the correlation between financial incentives and work at older ages is causal.
Keywords: retirement behavior; social security reforms; labor force participation; older workers
JEL Codes: J14; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reforms of social security programs (H55) | Reduced implicit tax on work at older ages (J26) |
| Reduced implicit tax on work at older ages (J26) | Stronger financial incentives for older individuals to remain in the labor force (J26) |
| Stronger financial incentives for older individuals to remain in the labor force (J26) | Increased labor force participation rates among older workers (J26) |
| Reforms of social security programs (H55) | Increased labor force participation rates among older workers (J26) |
| Dramatic increase in older adults' labor force participation rates since the mid-1990s (J21) | Attributed to reforms of social security programs (H55) |