Pension Benefits and the Decline in Elderly Male Labour Force Participation*

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 1972–76 is atria but able 10 more generous age pension benefits, with minor support from the discouraged worker effect associated with the current recession. A key feature of the model is the inclusion of several social security policy variables, apart from the value of the old-age pension. These policy variables include the 'free area' means test limit and the 1976 switch from a means to an income test.