IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/0272.html
   My bibliography  Save this paper

The Social Security Earnings Test, Labor Supply Distortions, and Foregone Payroll Tax Revenues

Author

Listed:
  • Anthony J. Pellechio

Abstract

In this study the social security earnings test is shown to have a significant effect empirically on the labor supply of retirement aged men. A rich data file from the Social Security Administration containing accurate benefit information provides a cross- section sample of 65-70 year old married men who worked some amount for empirical investigation. The data pertain to 1972. The results indicate that eliminating the earnings test would increase labor supply by 151 annual hours and payroll tax revenue by $31 per individual in the sample. The way in which the earnings test is relaxed is important also. Raising the exempt amount increased labor supply while lowering the tax rate did not. This follows from analyzing labor supply decisions over a nonlinear earnings-tested budget constraint. An econometric technique was developed for consistently estimating labor supply over nonlinear budget constraints. This technique conveniently summarized the budget constraint in an expected value calculation.

Suggested Citation

  • Anthony J. Pellechio, 1978. "The Social Security Earnings Test, Labor Supply Distortions, and Foregone Payroll Tax Revenues," NBER Working Papers 0272, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0272
    Note: PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w0272.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Boskin, Michael J. & Hurd, Michael D., 1978. "The effect of social security on early retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 361-377, December.
    2. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, July.
    3. Boskin, Michael J, 1977. "Social Security and Retirement Decisions," Economic Inquiry, Western Economic Association International, vol. 15(1), pages 1-25, January.
    4. Campbell, Colin D & Campbell, Rosemary G, 1976. "Conflicting Views on the Effect of Old-Age and Survivors Insurance on Retirement," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 369-388, September.
    5. Reuben Gronau, 1974. "The Effect of Children on the Housewife's Value of Time," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 457-490, National Bureau of Economic Research, Inc.
    6. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    7. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-694, July.
    8. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Laurence J. Kotlikoff & David A. Wise, 1988. "Pension Backloading, Wage Taxes, and Work Disincentives," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 161-196, National Bureau of Economic Research, Inc.
    2. Richard A. Ippolito, 1983. "Public Policy Towards Private Pensions," Contemporary Economic Policy, Western Economic Association International, vol. 1(3), pages 53-76, April.
    3. Gruber, Jonathan & Orszag, Peter, 2003. "Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(4), pages 755-773, December.
    4. André Masson & Denis Kessler & Dominique Strauss-Kahn, 1980. "Système de retraites et épargne des ménages en France," Revue Économique, Programme National Persée, vol. 31(6), pages 1157-1177.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anthony J. Pellechio, 1981. "Social Security and the Decision to Retire," NBER Working Papers 0734, National Bureau of Economic Research, Inc.
    2. Anthony J. Pellechio, 1978. "The Effect of Social Security on Retirement," NBER Working Papers 0260, National Bureau of Economic Research, Inc.
    3. Lange, Mark Dale, 1979. "An economic analysis of time allocation and capitol-labor ratios in household production of farm families in Iowa," ISU General Staff Papers 197901010800008285, Iowa State University, Department of Economics.
    4. repec:dau:papers:123456789/4924 is not listed on IDEAS
    5. repec:eee:labchp:v:1:y:1986:i:c:p:305-355 is not listed on IDEAS
    6. Christian S. Otchia, 2021. "Returns to Educational Attainment in Urban Ghana: The Role of Job-to-Job Transition," Progress in Development Studies, , vol. 21(1), pages 51-67, January.
    7. Meghir, Costas & Rivkin, Steven, 2011. "Econometric Methods for Research in Education," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 3, chapter 1, pages 1-87, Elsevier.
    8. Roger H. Gordon & Alan S. Blinder, 1980. "Market Wages, Reservation Wages, and Retirement Decisions," NBER Chapters, in: Econometric Studies in Public Finance, pages 277-308, National Bureau of Economic Research, Inc.
    9. John K. Dagsvik & TorbjØrn HÆgeland & Arvid Raknerud, 2011. "Estimating the returns to schooling: a likelihood approach based on normal mixtures," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(4), pages 613-640, June.
    10. Florence Arestoff, 2000. "Taux de rendement de l’éducation sur le marché du travail d’un pays en développement Un réexamen du modèle de gains de Mincer," Working Papers DT/2000/11, DIAL (Développement, Institutions et Mondialisation).
    11. José Miguel Benavente & David Bravo & Rodrigo Montero, 2011. "Wages And Workplace Computer Use In Chile," The Developing Economies, Institute of Developing Economies, vol. 49(4), pages 382-403, December.
    12. Zamnius, Alexey & Polbin, Andrey, 2021. "Estimating intertemporal elasticity of substitution of labor supply for married women in Russia," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 64, pages 23-48.
    13. repec:eee:labchp:v:3:y:1999:i:pc:p:3309-3416 is not listed on IDEAS
    14. Kevin Hollenbeck & Jean Kimmel, 2008. "Differences in the Returns to Education for Males by Disability Status and Age of Disability Onset," Southern Economic Journal, John Wiley & Sons, vol. 74(3), pages 707-724, January.
    15. Emanuela di Gropello, 2006. "Meeting the Challenges of Secondary Education in Latin America and East Asia : Improving Efficiency and Resource Mobilization," World Bank Publications - Books, The World Bank Group, number 7173, December.
    16. Laurence J. Kotlikoff & David A. Wise, 1988. "Pension Backloading, Wage Taxes, and Work Disincentives," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 161-196, National Bureau of Economic Research, Inc.
    17. Guillermina Jasso, 1996. "Exploring the Reciprocal Relations between Theoretical and Empirical Work," Sociological Methods & Research, , vol. 24(3), pages 253-303, February.
    18. Harmon, Colm & Hogan, Vincent & Walker, Ian, 2003. "Dispersion in the economic return to schooling," Labour Economics, Elsevier, vol. 10(2), pages 205-214, April.
    19. Fatma El-Hamidi, 2006. "General or Vocational Schooling? Evidence on School Choice, Returns, and 'Sheepskin' Effects from Egypt 1998," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(2), pages 157-176.
    20. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott & Helen Simpson, 2008. "Relative Wage Variation and Industry Location in the United Kingdom," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(4), pages 431-459, August.
    21. Leonardo Gasparini & Mariana Marchionni & Walter Sosa Escudero, 2000. "Characterization of inequality changes through microeconometric decompositions. The case of Greater Buenos Aires," IIE, Working Papers 025, IIE, Universidad Nacional de La Plata.
    22. Xavier Ramos Morilla & Josep Lluís Raymond Bara & Josep Oliver Alonso, 1999. "Not All University Degrees Yield the Same Return: Private and Social Returns to Higher Education for Males in Spain," Working Papers wpdea9904, Department of Applied Economics at Universitat Autonoma of Barcelona.
    23. Thomas Lemieux, 2014. "Occupations, fields of study and returns to education," Canadian Journal of Economics, Canadian Economics Association, vol. 47(4), pages 1047-1077, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0272. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.