Pension Benefits And The Decline In Elderly Male Labour Force Participation

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Abstract
This paper uses time series econometric methods to unravel the causes of the secular decline in the labour force participation rate of males aged 65 years and over. The study finds that most of the sharp and sudden decline in the participation rate during 1972-1976 is attributable equally to more generous age pension benefits and to life cycle wealth effects, with minor support from the discouraged worker effect associated with the current recession. The continuing decline over the 1976-1981 period is mainly due to wealth effects, with minor reinforcement from discouraged worker effects, and the failure to index the 'free area' means test limit of the age pension.
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