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Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?

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  • Gruber, Jonathan
  • Orszag, Peter

Abstract

The Social Security earnings test reduces payments to beneficiaries whose labor income exceeds a given threshold. We investigate the impact of this rule by studying the significant changes in its structure over the past 25 years. We find that the earnings test exerts no robust influence on the labor supply decisions of men, although there is some suggestive evidence for a labor supply response among women. We also find that loosening the earnings test accelerates benefits receipt among the eligible population, lowering benefits levels, and heightening concerns about the standard of living of these elderly at very advanced ages.

Suggested Citation

  • Gruber, Jonathan & Orszag, Peter, 2003. "Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(4), pages 755-773, December.
  • Handle: RePEc:ntj:journl:v:56:y:2003:i:4:p:755-73
    DOI: 10.17310/ntj.2003.4.03
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    More about this item

    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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