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Benefit Generosity and the Income Effect on Labour Supply: Quasi‐Experimental Evidence

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  • Alexander M. Danzer

Abstract

This study uses an unanticipated, exogenous doubling of the legal minimum pension in Ukraine as a unique quasi-experiment to evaluate the income effect on various aspects of labour supply among the elderly. In contrast to previous studies, the unusually simple pension eligibility rule allows estimating a pure causal income effect. Applying reduced form difference-in-differences and regression discontinuity as well as instrumental variable methods on two nationally representative data sets yields a retirement semi-elasticity of 0.1-0.2. Men and women respond at different margins of labour supply but with similar overall effect.
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  • Alexander M. Danzer, 2013. "Benefit Generosity and the Income Effect on Labour Supply: Quasi‐Experimental Evidence," Economic Journal, Royal Economic Society, vol. 123, pages 1059-1084, September.
    • Handle: RePEc:ecj:econjl:v:123:y:2013:i::p:1059-1084
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    2. Yanying Chen & Yi Jin Tan, 2018. "The effect of non-contributory pensions on labour supply and private income transfers: evidence from Singapore," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-54, December.
    3. Becker, Sebastian & Buslei, Hermann & Geyer, Johannes & Haan, Peter, 2022. "The Effect of Pension Wealth on Employment," IZA Discussion Papers 15836, Institute of Labor Economics (IZA).
    4. Malkova, Olga, 2020. "Did Soviet elderly employment respond to financial incentives? Evidence from pension reforms," Journal of Public Economics, Elsevier, vol. 182(C).
    5. Giesecke, Matthias & Jäger, Philipp, 2021. "Pension incentives and labor supply: Evidence from the introduction of universal old-age assistance in the UK," Journal of Public Economics, Elsevier, vol. 203(C).
    6. Kadir Atalay & Garry F. Barrett & Peter Siminski, 2019. "Pension incentives and the joint retirement of couples: evidence from two natural experiments," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(3), pages 735-767, July.
    7. David G. McCarthy & Po‐Lin Wang, 2022. "Wait your turn: Pension incentives, workplace rules, and labor supply among Philadelphia municipal workers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(4), pages 985-1029, December.
    8. Kupets, Olga, 2016. "Education-job mismatch in Ukraine: Too many people with tertiary education or too many jobs for low-skilled?," Journal of Comparative Economics, Elsevier, vol. 44(1), pages 125-147.
    9. Louise Grogan & Fraser Summerfield, 2019. "Government Transfers, Work, and Wellbeing: Evidence from the Russian Old-Age Pension," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(4), pages 1247-1292, October.
    10. Hartmut Lehmann & Alexander Muravyev & Klaus Zimmermann, 2012. "The Ukrainian longitudinal monitoring survey: towards a better understanding of labor markets in transition," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-15, December.
    11. Paweł Strzelecki & Joanna Tyrowicz, 2015. "Crowding (out) the retirees? RDD application to raising effective retirement age in Poland," Working Papers 2015-10, Faculty of Economic Sciences, University of Warsaw.
    12. Sebastian Becker & Hermann Buslei & Johannes Geyer & Peter Haan, 2021. "Employment Responses to Income Effect: Evidence from Pension Reform," Discussion Papers of DIW Berlin 1941, DIW Berlin, German Institute for Economic Research.
    13. Danzer, Alexander M. & Danzer, Natalia, 2016. "The long-run consequences of Chernobyl: Evidence on subjective well-being, mental health and welfare," Journal of Public Economics, Elsevier, vol. 135(C), pages 47-60.
    14. Victor Lyashok, 2019. "The Effect Of Pension Growth On The Labor Force Participation Of Pensioners In Russia," HSE Working papers WP BRP 22/PSP/2019, National Research University Higher School of Economics.
    15. Puhani, Patrick A. & Tabbert, Falko, 2016. "The effects of pension changes on age of first benefit receipt: Regression discontinuity evidence from repatriated ethnic Germans," Labour Economics, Elsevier, vol. 38(C), pages 12-23.
    16. Inés Berniell & Dolores de la Mata & Matilde Pinto Machado, 2020. "The Impact of a Permanent Income Shock on the Situation of Women in the Household: The Case of a Pension Reform in Argentina," Economic Development and Cultural Change, University of Chicago Press, vol. 68(4), pages 1295-1343.
    17. Danzer, Alexander, 2015. "Skill biased labour demand and the wage growth of younger workers: Evidence from an unexpected pension reform," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113051, Verein für Socialpolitik / German Economic Association.
    18. Puhani, Patrick A. & Tabbert, Falko, 2015. "Effects of Changes in Pensions on the Age of First Benefit Receipt: Regression Discontinuity Evidence from Repatriated Ethnic Germans," IZA Discussion Papers 8787, Institute of Labor Economics (IZA).
    19. Atalay, Kadir & Barrett, Garry F., 2016. "Pension Incentives and the Retirement Decisions of Couples," IZA Discussion Papers 10013, Institute of Labor Economics (IZA).
    20. Paweł Strzelecki & Joanna Tyrowicz, 2015. "Crowding (out) the retirees? RDD application to raising effective retirement age in Poland," Working Papers 2015-10, Faculty of Economic Sciences, University of Warsaw.
    21. Alexander M. Danzer & Lennard Zyska, 2023. "Pensions and Fertility: Microeconomic Evidence," American Economic Journal: Economic Policy, American Economic Association, vol. 15(2), pages 126-165, May.
    22. Danzer, Alexander M. & Danzer, Natalia, 2016. "Pension generosity and mental wellbeing: The effect of eradicating poverty at old-age," VfS Annual Conference 2016 (Augsburg): Demographic Change 145910, Verein für Socialpolitik / German Economic Association.

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