Incentive Effects of Supplemental Security Income (SSI)

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DESCRIPTION (provided by applicant): We propose to study the incentive effects of the Supplemental Security Income (SSI) program for the aged on their work effort and saving activity in the years shortly before the program eligibility age of 65. The long-term objectives of our research plan are two-fold. The first is to substantially increase knowledge about the impacts of SSI on the work and saving behavior of the elderly poor and near-poor by utilizing data sources-the Health and Retirement Study (HRS) and the Current Population Survey (CPS)-that offer important advantages and enable a richer description of the effects of SSI than we have obtained using data from the Survey of Income and Program Participation (SIPP). The second is to explore the patterns of use of the SSI and Social Security Early Retirement (SSER) programs. With regard to the latter objective, interactions between these programs, including the effect that the design of one program has on the desirability of participation in the other, are of particular interest. Four specific projects aimed at achieving these long-term objectives will be carried out. The first examines the robustness of our earlier findings and extends our previous analysis using alternative data sources, testing the hypotheses that likely future SSI recipients work and save less when SSI is more generous. The second uses the HRS's longitudinal framework to examine the actual time patterns of the work effort and saving of individuals, and to address other econometric issues exploiting the longitudinal framework. The third enriches our previous methodological approach by modeling the joint determination of work effort and savings behavior of likely future participants as they approach the eligibility age for SSI. The fourth recognizes that SSER benefits may be an important financial resource for individuals nearing age 65 who plan to participate in SSI, and therefore tests the hypothesis that likely future SSI recipients are often able to reduce their work effort because of the SSER program. This project also examines whether SSI policy encourages SSER use by nullifying the early retirement actuarial reduction in the Social Security benefit that normally accompanies SSER. This occurs for the elderly poor when SSI determines their net government old age transfer at the margin.