Did Soviet elderly employment respond to financial incentives? Evidence from pension reforms

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Abstract

This study answers the open question of whether workers respond to financial incentives in a command economy. To do this, I evaluate pension reforms in Soviet Russia in 1964 and 1969 that allowed pensioners to receive a greater share of their pensions if they worked, resulting in a progressive elimination of benefit reduction rates. Variation in group eligibility and variation in benefit reduction rates in eastern and western regions allow for the use of several difference-in-differences frameworks. I collect and digitize novel data from the Soviet archives on pensioner employment, constructing the first database of the Soviet old-age labor market. I find that Soviet pensioners are responsive to financial incentives. By 1969, after the benefit reduction rate fell from an average of 47.8% to 24.1%, pensioner employment rates rose by 5.7 percentage points, representing a 47% increase. Finally, I provide illustrative estimates of the employment elasticity with respect to the average net-of-tax rate that range from 0.6 to 1.4.

Original languageEnglish
Article number104111
JournalJournal of Public Economics
Volume182
DOIs
StatePublished - Feb 2020

Bibliographical note

Publisher Copyright:
© 2019 Elsevier B.V.

Keywords

  • Employment
  • Pension
  • Retirement
  • Soviet economy

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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