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Labor Supply Effects of the Recent Social Security Benefit Cuts: Empirical Estimates Using Cohort Discontinuities

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  • Giovanni Mastrobuoni

Abstract

In response to a "crisis" in Social Security financing two decades ago Congress implemented an increase in the Normal Retirement Age (NRA) of two months per year for cohorts born in 1938 and after. These cohorts began reaching retirement age in 2000. This paper studies the effects of these benefit cuts on recent retirement behavior. The evidence strongly suggests that the mean retirement age of the affected cohorts has increased by about half as much as the increase in the NRA. If older workers continue to increase their labor supply in the same way, there will be important implications for the estimates of Social Security trust fund exhaustion that have played such a major role in recent discussions of Social Security reform.

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Bibliographic Info

Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 33.

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Length: 35 pages
Date of creation: 2005
Date of revision: 2006
Handle: RePEc:cca:wpaper:33

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Keywords: normal retirement age; retirement behavior; social security reform;

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