Social Security and the Evolution of Elderly Poverty

Gary V. Engelhardt, Jonathan Gruber

NBER Working Paper No. 10466
Issued in May 2004
NBER Program(s):Aging, Public Economics

We use data from the March 1968-2001 Current Population Surveys to document the evolution of elderly poverty over this time period, and to assess the causal role of the Social Security program in reducing poverty rates. We develop an instrumental variable approach that relies on the large increase in benefits for birth cohorts from 1885 through 1916, and the subsequent decline and flattening of real benefits growth due to the Social Securing 'notch', to estimate of Social Security on elderly poverty. Our findings suggest that over all elderly families the elasticity of poverty to benefits is roughly unitary. This suggests that reductions in Social Security benefits would significantly alter the poverty of the elderly.

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Document Object Identifier (DOI): 10.3386/w10466

Published: Auerbach, Alan, David Card and John Quigley (eds.) Public Policy and the Income Distribution. New York: Russell Sage Foundation, 2006.

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