If Social Security were changed so that those retiring at a later age receive substantially more benefits,then the substitution effect would work to ________ the retirement age and the income effect would work to ________ the retirement age.

Question

Quizplus · Accepted Answer

The substitution effect would increase the retirement age because working longer becomes relatively more attractive due to higher future benefits, acting as an incentive to substitute leisure (retirement) for labor. The income effect, however, would decrease the retirement age because with higher benefits, individuals can afford to retire earlier, having secured a sufficient income for their retirement years.

If Social Security Were Changed So That Those Retiring at a Later