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The Labour Supply Effect of the Abolition of the Earnings Rule for Older Workers in the United Kingdom

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Listed:
  • Richard Disney

    (University of Nottingham, and Institute for Fiscal Studies, London Financial Services Authority)

  • Sarah Smith

    (University of Nottingham, and Institute for Fiscal Studies, London Financial Services Authority)

Abstract

High effective tax rates on work at and around state pension age deter participation. An example is the "earnings test" operating in several OECD countries. The United States abolished its test for the 65+ age group in 2000. The United Kingdom offers a "natural experiment" of this reform, as it abolished its test, known as the "earnings rule", in 1989. We examine the effect of this change, taking account of the opportunity to defer pension rights. Abolition of the rule raised working hours of older male workers by around 4 hours a week, with a lesser impact on women"s behaviour. Copyright Royal Economic Society 2002.

Suggested Citation

  • Richard Disney & Sarah Smith, 2002. "The Labour Supply Effect of the Abolition of the Earnings Rule for Older Workers in the United Kingdom," Economic Journal, Royal Economic Society, vol. 112(478), pages 136-152, March.
  • Handle: RePEc:ecj:econjl:v:112:y:2002:i:478:p:c136-c152
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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