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.
|Journal||Journal of Public Economics|
|State||Published - Feb 2020|
Bibliographical noteFunding Information:
Comments from numerous individuals, including David Agrawal, Martha Bailey, David Blau, Elizabeth Brainerd, Charles Brown, Alexander Gelber, Daniel Hamermesh, Hartmut Lehmann, Melinda Morrill, Andreas Peichl, Luigi Pistaferri, Kosali Simon, Joel Slemrod, Ugo Troiano, Ken Troske, Jan van Ours, Barbara Wolfe, James Ziliak, Ariell Zimran, Josef Zweimüller, three anonymous referees, seminar participants at North Carolina State University, the University of Kentucky, University of Louisville, RAND and ZEW, and from conference participants at Society of Labor Economists, National Tax Association, International Institute of Public Finance (IIPF), IIPF Summer Institute, the Junior/Senior symposium hosted by the IZA, Vanderbilt Empirical Applied Microeconomics Fest, and the ASSA helped to improve the paper. I thank the W. E. Upjohn Institute and the University of Kentucky, Department of Economics for funding this research. Any errors are my own.
© 2019 Elsevier B.V.
- Soviet economy
ASJC Scopus subject areas
- Economics and Econometrics