Pension incentives and labor supply: Evidence from the introduction of universal old-age assistance in the UK

Matthias Giesecke and Philipp Jäger

No 844, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: We study the labor supply effects and welfare implications of introducing a universal means-tested old-age assistance program in times of very limited social protection. We take advantage of a unique historical reform: The Old-Age Pension Act (OPA) of 1908, which, for the first time, provided pensions to older people in the UK. Using recently released full-count census data covering the entire population, we exploit variation at the newly created age-based eligibility threshold. Our results show a considerable and abrupt decline in labor force participation of 6.0 percentage points (13%) when older workers reach the eligibility age of 70. This sudden drop only occurs at the age cutoff and only after the OPA was implemented. Despite the considerable labor supply decline, the overall efficiency loss from the OPA was limited and most likely outweighed by equity gains.

Keywords: Old-age assistance; labor supply; retirement; regression discontinuity design; equity-efficiency trade-off (search for similar items in EconPapers)
JEL-codes: D61 H21 H55 J14 J22 J26 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-age, nep-dem, nep-gen, nep-lab and nep-pbe
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Related works:
Journal Article: Pension incentives and labor supply: Evidence from the introduction of universal old-age assistance in the UK (2021)
Working Paper: Pension Incentives and Labor Supply: Evidence from the Introduction of Universal Old-Age Assistance in the UK (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:844

DOI: 10.4419/86788979

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