Retirement, Family Insurance, and Social Insurance: Evidence from the Great Depression and the Introduction of Social Security

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In evaluating alternative reform proposals for Social Security and related programs in the United States, it is critical to understand two key dimensions of the overall costs and benefits of these programs. One is how these programs affect the choices and well-being of the individuals eligible to receive benefits themselves. The other is what effects those benefits may have on beneficiaries' children and families. This project will investigate these issues by focusing on the Old Age Assistance (OAA) program, a state-administered program introduced alongside Social Security in the 1930s that was a precursor of Social Security's Supplemental Security Income. The OAA program provides an unusually rich empirical setting in which to investigate the effects of social insurance programs both because it was the largest source of government old-age support until the 1950s and because it exhibited wide variation in program rules and benefit levels across states. This project examines the costs and benefits of the OAA program in terms of its direct effects on beneficiaries themselves and the indirect effects on beneficiaries' children and families. Two of the key challenges that arise from examining these effects in most social insurance programs are the difficulty in finding quasi-experimental variation in national programs such as Social Security and the difficulty of identifying family links in most datasets. This project will address both challenges by exploiting the significant variation in OAA policies across different states and across different groups of people within states -- variation much larger than in similar programs in more recent time periods -- and by taking advantage of newly available Census microdata covering the full US population in all Census years through 1940. Using quasi-experimental research designs and rich data, the investigators will estimate the effects of OAA on labor supply and family transfers. This project will further use both structural and sufficient-statistics methods to determine the implications of the quasi-experimental evidence for the welfare effects of these social insurance programs.