Guaranteed Income: SSI and the Well-Being of the Elderly Poor

Discussions of changes in the Social Security program must necessarily consider the impact of such changes on the well-being of the poor elderly. Under the current system, the financial needs of this population are met by the Supplement Security Income program (SSI). SSI has done much to improve situation of the poorest elderly but has the potential to do more. This paper examines that potential. One of the most surprising aspect of the program is that many of those eligible for benefits are not enrolled. Here I examine the correlates of participation for a sample of eligible individuals and use the results to simulate the effect of changes in eligibility criteria on participation and on costs. The largest expansion considered in the paper, providing an income guarantee for all elderly individuals that is equal to the poverty line, increases payments directed towards the elderly by 90 percent, to just over 8 billion in 1993 dollars. Although large, this $8 billion is less than half of the expenditures for the SSI disabled population in that year. Modifications to SSI that increase income disregards, eliminate the asset test, or base income eligibility solely on Social Security income, would be less costly, but would also provide less relief to the poor. Importantly, all programs, including the current system, could have substantially greater effects on poverty if participation rates were increased.

Testing Parental Altruism: Implications of a Dynamic Model

Each year parents transfer a great deal of money to their adult children. While intuition might suggest that these transfers are altruistic and made out of concern for the well-being of the children, the fundamental prediction of the altruistic model has been decisively rejected in empirical tests. Specifically, the required derivative restriction-that an increase of one dollar in the income of the recipient, accompanied by a decrease of one dollar in the income of the donor, leads to a one dollar reduction in transfers-fails to hold. I show in this paper that in fact, this prediction will not hold if parents use observations on the current incomes of children to update their expectations about future incomes. This result implies that many past studies have relied on too restrictive a test, and furthermore, that our ability to distinguish empirically between altruistic and exchange behavior is severely limited. The paper also analyzes the variation in transfer behavior over time and finds substantial change across periods in recipiency status as well as strong correlation between inter vivos transfers and the transitory income of the recipient. This evidence suggest that dynamic models can provide insights into transfer behavior that are impossible to obtain in a static context.

Three Generations of Changing Gender Patterns of Schooling in the People\u27s Republic of China

The phenomenon of son preference in the People’s Republic of China and throughout much of Asia has been well documented. However, changing economic conditions, such as increases in educational attainment and employment opportunities for women and the rise in the prevalence of one-child families, have likely changed the incentives for parents to invest in daughters. In this paper we take advantage of data spanning three generations of Chinese families to examine the evolution of educational attainment for boys and girls and importantly the relative levels of schooling of each gender. We also use variation in the timing of compulsory schooling laws and the implementation of the one-child policy to assess the effect of these policy measures on the relative educational levels. We find a substantial narrowing of the gap between the schooling of boys and girls, so much so that girls now have more schooling on average than boys. In addition, public policy initiatives had a larger effect in rural than urban areas

The Relationship Between Job Characteristics and Retirement

We study the influence of job characteristics on prospective retirement as measured by the probability of working past age 62 or 65. The characteristics fall into three broad classes: physical and mental requirements, job flexibility including employer accomodation to older workers, and financial aspects such as pensions and health care insurance. Using data from the Health and Retirement Survey, we find that physical and mental job requirements have a rather small influence on prospective retirement, whereas measures of job flexibility and financial aspects of the job are important determinants.

Private Information and its Effect on Market Equilibrium: New Evidence from Long-Term Care Insurance

This paper examines the standard test for asymmetric information in insurance markets: that its presence will result in a positive correlation between insurance coverage and risk occurrence. We show empirically that while there is no evidence of this positive correlation in the long-term care insurance market, asymmetric information still exists. We use individuals' subjective assessments of the chance they will enter a nursing home, together with the insurance companies' own assessment, to show that individuals do have private information about their risk type. Moreover, this private information is positively correlated with insurance coverage. We reconcile this direct evidence of asymmetric information with the lack of a positive correlation between insurance coverage and risk occurrence by demonstrating the existence of other unobserved characteristics that are positively related to coverage and negatively related to risk occurrence. Specifically, we find that more cautious individuals are both more likely to have long-term care insurance and less likely to enter a nursing home. Our results demonstrate that insurance markets may suffer from asymmetric information, and its negative efficiency consequences, even if those with more insurance are not higher risk. The results also suggest an alternative approach to testing for asymmetric information in insurance markets.

Why Parents Play Favorites: Explanations for Unequal Bequests

Economists have invested a great deal of effort in trying to understand the motivation for family transfers, yet recent empirical work testing the seemingly appealing models of altruism and exchange has led to decidedly mixed results. A major stumbling block has been the lack of adequate data. We take a fresh look at the issue using responses to an innovative survey question that directly asks mother about the planned division of their estates. We find that both altruism and exchange are frequently offered as explanations of behavior and are of nearly equal importance. Furthermore, the explanations are consistent with observable characteristics of the mother, lending support to the validity of the question. We also find that among step or adopted families, genetic ties play an important role. Because motivating factors appear to differ across families the lack of a consensus among previous researchers about motives ought not to be surprising.