Social Security Income and the Well-Being of the Elderly: Evidence from the Social Security Notch

Abstract

This paper exploits Social Security law changes to identify the effect of Social Security income on the use of formal and informal home care by the elderly. Results from an instrumental variables estimation strategy show that as retirement income increases, elderly individuals increase their use of formal home care and become less likely to rely on informal home care provided to them by their children. This negative effect on informal home care is most likely driven by male children withdrawing from their caregiving roles. The empirical results also suggest that higher Social Security benefits would encourage the use of formal home care by those who would not have otherwise used any type of home care and would also encourage the use of both types of home care services among elderly individuals.