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Labor supply effects of the recent social security benefit cuts: Empirical estimates using cohort discontinuities

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  • Mastrobuoni, Giovanni

Abstract

In response to a "crisis" in Social Security financing two decades ago Congress implemented an increase in the Normal Retirement Age (NRA) of 2Â 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 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 might 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.

Suggested Citation

  • Mastrobuoni, Giovanni, 2009. "Labor supply effects of the recent social security benefit cuts: Empirical estimates using cohort discontinuities," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1224-1233, December.
  • Handle: RePEc:eee:pubeco:v:93:y:2009:i:11-12:p:1224-1233
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    More about this item

    Keywords

    Normal retirement age Retirement behavior Social security reform;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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