The availability of Social Security pensions to workers over normal retirement age results in an income effect unfavorable to work but no substitution effect.

Question

Quizplus · Accepted Answer

The income effect of Social Security pensions reduces the incentive to work because workers may feel less need to earn income from employment. However, there is no substitution effect because the availability of Social Security pensions does not affect the relative price of leisure and work.

The Availability of Social Security Pensions to Workers Over Normal