One of the most important issues in the debate over Social Security is how various changes in the system would change retirement behavior. A critical parameter in this context is the income effect on retirement— how a change in income affects retirement behavior, ceteris paribus. To estimate the income effect, we examine tax-return generated data on the labor force activity of a group of older people before and after they receive inheritances. The results are consistent with the notion that income effects are small. Neither retirement decisions nor the magnitude of earnings conditional on working seem to be affected very much by the receipt of an inheritance.
National Institute on Aging
Aging Studies Program Paper Series
Economic Policy | Economics | Public Affairs, Public Policy and Public Administration | Public Policy
Holtz-Eakin, Douglas; Joulfaian, David; and Rosen, Harvey S., "Estimating the Income Effect on Retirement" (1999). Center for Policy Research. 429.
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