Social security and the elderly: A simulation of policy changes

Abstract

This paper investigates the labour supply effects and the corresponding financial implications that would result from some specific changes in the British social security system. For that purpose it uses a previously estimated model of labour supply decisions by elderly people and carries out a simulation exercise of each of the policy changes considered. These are: raising the state retirement pension, abolishing the earnings rule, changing the statutory pensionable age and introducing a system of flexible retirement. We find that, of the four policy changes considered, the last two would have the largest labour supply effects.