Social Security and Labor Supply of Older Workers and the Disabled

Abstract

The essays that comprise my dissertation analyze the interactions among old age labor supply, health, and Social Security system in the United States. In the first chapter of my dissertation, I provide estimate of the causal effect of Social Security Disability Insurance (SSDI) application on employment of denied applicants. Using exogenous variations of SSDI application decision, I find that the employment rate is 36 percentage points lower for the denied applicants than that of comparable non-applicants in the short-run. In the second chapter (with Matthew Rutledge and April Wu) we explore the relationship between individuals’ expectation on longevity and their plans for retirement in a quasi-experimental setting. The estimates in this paper suggest a large and statistically significant relationship between subjective life expectancy and retirement expectations: an individual who is one standard deviation more optimistic about living to age 75 has a greater probability of planning to work fulltime at 62 and 65 by 10 percent and 21 percent, respectively. In the third chapter of my dissertation (with Norma Coe and Matthew Rutledge) we identify the contribution of Medicare in explaining the retirement behavior of workers. We find individuals without access to retiree health insurance from work are 7.5 percentage points more likely to retire soon after their 65th birthdays and are 5.8 percentage points less likely to delay retirement until the Full Retirement Age (FRA) than those with that insurance. We interpret this finding as evidence that Medicare eligibility persuades more people to retire, because they can begin receiving federal health coverage. The findings of the research in my dissertation provide important insights in making the Social Security system more welfare enhancing for the older workers and the disabled as well as keeping it sustainable in the long-run.