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The repeal of the retirement earnings test and the labor supply of older men

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  • ENGELHARDT, GARY V.
  • KUMAR, ANIL

Abstract

This paper examines the impact of the Senior Citizens Freedom to Work Act of 2000, which abolished the Social Security retirement earnings test for those aged 65-69, on the labor supply of older men using data from the 1996-2004 waves of the Health and Retirement Study (HRS). Based on reduced-form specifications, we find that the repeal of the earnings test increased labor supply on the intensive margin by 12-17%, the bulk of which was concentrated among men with a high-school degree, whose labor supply rose by 19-26%. We formulate a unique test for endogenous reporting of health status by examining how reported health changes with the repeal of the earnings test. We find some evidence of endogenous self-reported health status. In particular, older men were substantially less likely to have reported that health limits their ability to work after, relative to before the earnings test repeal, with the bulk of the effect concentrated among men with high-school degrees, who had the largest labor-supply response to the repeal.
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Suggested Citation

  • Engelhardt, Gary V. & Kumar, Anil, 2009. "The repeal of the retirement earnings test and the labor supply of older men," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(04), pages 429-450, October.
  • Handle: RePEc:cup:jpenef:v:8:y:2009:i:04:p:429-450_00
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    Cited by:

    1. Erik HernæS & Zhiyang Jia, 2013. "Earnings Distribution and Labour Supply after a Retirement Earnings Test Reform," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(3), pages 410-434, June.
    2. Christian N. Brinch & Erik Hernæs & Zhiyang Jia, 2017. "Salience and Social Security Benefits," Journal of Labor Economics, University of Chicago Press, vol. 35(1), pages 265-297.
    3. Dennis Fredriksen & Christian N. Brinch & Ola L. Vestad, 2017. "Life expectancy and claiming behavior in a flexible pension system," Discussion Papers 859, Statistics Norway, Research Department.
    4. J. Wilson Mixon Jr. & E. Frank Stephenson, 2016. "Young and Out of Work: An Analysis of Teenage Summer Employment, 1972–2012," Cato Journal, Cato Journal, Cato Institute, vol. 36(1), pages 89-99, Winter.
    5. Ning, Manxiu & Gong, Jinquan & Zheng, Xuhui & Zhuang, Jun, 2016. "Does New Rural Pension Scheme decrease elderly labor supply? Evidence from CHARLS," China Economic Review, Elsevier, vol. 41(C), pages 315-330.
    6. Gary V. Engelhardt & Anil Kumar, 2014. "Taxes and the Labor Supply of Older Americans: Recent Evidence From the Social Security Earnings Test," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(2), pages 443-458, June.
    7. Leonard E. Burman & Norma B. Coe & Kevin Pierce & Liu Tian, 2014. "The Effects of the Taxation of Social Security Benefits on Older Workers’ Income and Claiming Decisions," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(2), pages 459-486, June.
    8. Jesse Bricker & Gary V. Engelhardt, 2007. "Measurement Error in Earnings Data in the Health and Retirement Study," Working Papers, Center for Retirement Research at Boston College wp2007-16, Center for Retirement Research, revised Oct 2007.
    9. Hernæs, Erik & Jia, Zhiyang, 2009. "Labour Supply Response of a Retirement Earnings Test Reform," Memorandum 25/2009, Oslo University, Department of Economics.
    10. Hernæs, Erik & Markussen, Simen & Piggott, John & Røed, Knut, 2016. "Pension reform and labor supply," Journal of Public Economics, Elsevier, vol. 142(C), pages 39-55.
    11. Macunovich, Diane J., 2009. "Older Men: Pushed into Retirement by the Baby Boomers?," IZA Discussion Papers 4652, Institute for the Study of Labor (IZA).
    12. Vere, James P., 2011. "Social Security and elderly labor supply: Evidence from the Health and Retirement Study," Labour Economics, Elsevier, vol. 18(5), pages 676-686, October.
    13. Shimizutani, Satoshi & Oshio, Takashi, 2013. "Revisiting the labor supply effect of social security earnings test: New evidence from its elimination and reinstatement in Japan," Japan and the World Economy, Elsevier, vol. 28(C), pages 99-111.
    14. Christian N. Brinch & Erik Hernæs & Zhiyang Jia, 2012. "Labor supply on the eve of retirement. Disparate effects of immediate and postponed rewards to working," Discussion Papers 698, Statistics Norway, Research Department.
    15. Macunovich, Diane J., 2009. "Older Women: Pushed into Retirement by the Baby Boomers?," IZA Discussion Papers 4653, Institute for the Study of Labor (IZA).
    16. Bo MacInnis, 2009. "Social Security and the Joint Trends in Labor Supply and Benefits Receipt Among Older Men," Working Papers, Center for Retirement Research at Boston College wp2009-22, Center for Retirement Research, revised Oct 2009.

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