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Partial retirement and the earnings test

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  • Josef Zweimüller

Abstract

This paper studies the effects of the earnings test on retirement behavior. The earnings tests of most social security systems tax post-retirement earnings at a relatively high level and do not lead to actuarially fair increases in future benefits. This results in discouragement of partial retirement. The paper shows that a reduction in the earnings test's tax rate is likely to increase part-time work; and that in special cases the increase in work effort may even lead to a reduction in the net transfer from social security to the individual.
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Suggested Citation

  • Josef Zweimüller, 1993. "Partial retirement and the earnings test," Journal of Economics, Springer, vol. 57(3), pages 295-303, October.
  • Handle: RePEc:kap:jeczfn:v:57:y:1993:i:3:p:295-303
    DOI: 10.1007/BF01234641
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    References listed on IDEAS

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    1. Honig, Marjorie & Reimers, Cordelia, 1989. "Is It Worth Eliminating the Retirement Test?," American Economic Review, American Economic Association, vol. 79(2), pages 103-107, May.
    2. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, vol. 54(3), pages 555-584, May.
    3. Burtless, Gary & Moffitt, Robert A, 1985. "The Joint Choice of Retirement Age and Postretirement Hours of Work," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 209-236, April.
    4. A. Zabalza & C. Pissarides & M. Barton, 1980. "Social security and the choice between full-time work, part-time work and retirement," NBER Chapters,in: Econometric Studies in Public Finance, pages 245-276 National Bureau of Economic Research, Inc.
    5. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114.
    6. Sheshinski, Eytan, 1978. "A model of social security and retirement decisions," Journal of Public Economics, Elsevier, vol. 10(3), pages 337-360, December.
    7. Vincent P. Crawford & David M. Lilien, 1981. "Social Security and the Retirement Decision," The Quarterly Journal of Economics, Oxford University Press, vol. 96(3), pages 505-529.
    8. John B. Burbidge & A. Leslie Robb, 1980. "Pensions and Retirement Behaviour," Canadian Journal of Economics, Canadian Economics Association, vol. 13(3), pages 421-437, August.
    9. Gary Burtless & Robert A. Moffitt, 1986. "Social Security, Earnings Tests, and Age at Retirement," Public Finance Review, , vol. 14(1), pages 3-27, January.
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    Cited by:

    1. Zweimuller, Josef & Winter-Ebmer, Rudolf & Falkinger, Josef, 1996. "Retirement of spouses and social security reform," European Economic Review, Elsevier, vol. 40(2), pages 449-472, February.

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