Does Social Security Serve as an Economic Stabilizer?

In times of economic distress, both individuals and localities can benefit from stable sources of income. While a large literature documents the benefits that individuals enjoy from guaranteed income such as Social Security, less attention has been given to the stabilizing force of Social Security at the community level. Intuitively, if many people are insulated from recessions through stable Social Security income, they will continue to demand local goods and services, propping up local employment and earnings. This paper uses the American Community Survey to estimate the extent to which Social Security benefits stabilize local economies, by examining how the relationship between a county’s economic outcomes and those of its surrounding counties vary with the share of county income from Social Security