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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). We use the fine structure of the 2000 Act to develop a new measure of exposure to the earnings test that varies across calendar years both by month and year of birth. We find that much, if not all, of the labor-supply response occurred for sub-groups of men who, either because of high mortality risk, high rates of pure time preference, or liquidity constraints, may have found the actuarial adjustment built into the earnings test relatively disadvantageous, particularly the lesser educated.

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(4), 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. Alexander Gelber & Damon Jones & Daniel W. Sacks & Jae Song, 2022. "The Employment Effects of the Social Security Earnings Test," Journal of Human Resources, University of Wisconsin Press, vol. 57(2), pages 341-371.
    2. Jonah B. Gelbach & Doug Miller, 2009. "Robust Inference with Multi-way Clustering," Working Papers 226, University of California, Davis, Department of Economics.
    3. Oshio, Takashi & Shimizutani, Satoshi & Oishi, Akiko S., 2020. "Examining how elderly employment is associated with institutional disincentives in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 56(C).
    4. 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.
    5. 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.
    6. Andersen, Asbjørn Goul & Markussen, Simen & Røed, Knut, 2021. "Pension reform and the efficiency-equity trade-off: Impacts of removing an early retirement subsidy," Labour Economics, Elsevier, vol. 72(C).
    7. 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.
    8. Hernaes, Erik & Markussen, Simen & Piggott, John & Røed, Knut, 2015. "Pension Reform and Labor Supply: Flexibility vs. Prescription," IZA Discussion Papers 8812, IZA Network @ LISER.
    9. Macunovich, Diane J., 2009. "Older Men: Pushed into Retirement by the Baby Boomers?," IZA Discussion Papers 4652, IZA Network @ LISER.
    10. 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.
    11. 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.
    12. Lin, Yujie, "undated". "The Impact of China's New Rural Pension Scheme on Family Labor Supply: Does the Beneficiary's Gender Matter?," 2018 Annual Meeting, August 5-7, Washington, D.C. 274181, Agricultural and Applied Economics Association.
    13. 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.
    14. 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.
    15. 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.
    16. Christian N. Brinch & Dennis Fredriksen & Ola L. Vestad, 2018. "Life Expectancy and Claiming Behavior in a Flexible Pension System," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(4), pages 979-1010, October.
    17. Fitzpatrick, Maria D., 2019. "Pension reform and return-to-work policies," Journal of Pension Economics and Finance, Cambridge University Press, vol. 18(4), pages 500-514, October.
    18. 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.
    19. 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.
    20. Macunovich, Diane J., 2009. "Older Women: Pushed into Retirement by the Baby Boomers?," IZA Discussion Papers 4653, IZA Network @ LISER.
    21. 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.
    22. Tengjiao Chen & Yajie Sheng & Yu Xu, 2020. "The Anticipation Effect of the Earnings Test Reform on Younger Cohorts," Public Finance Review, , vol. 48(4), pages 387-424, July.
    23. Hernæs, Erik & Jia, Zhiyang, 2009. "Labour Supply Response of a Retirement Earnings Test Reform," Memorandum 25/2009, Oslo University, Department of Economics.
    24. 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.

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