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

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Listed:
  • 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, vol. 56(4), pages 755-773, December.
  • Handle: RePEc:ntj:journl:v:56:y:2003:i:4:p:755-73
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    References listed on IDEAS

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    1. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, pages 832-857.
    2. repec:hoo:wpaper:e-90-11 is not listed on IDEAS
    3. Feldstein, Martin & Samwick, Andrew A., 1992. "Social Security Rules and Marginal Tax Rates," National Tax Journal, National Tax Association, pages 1-22.
    4. Anthony J. Pellechio, 1978. "The Social Security Earnings Test, Labor Supply Distortions, and Foregone Payroll Tax Revenues," NBER Working Papers 0272, National Bureau of Economic Research, Inc.
    5. Burkhauser, Richard V & Turner, John A, 1978. "A Time-Series Analysis on Social Security and Its Effect on the Market Work of Men at Younger Ages," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 701-715, August.
    6. Eric Maskin & Yingyi Qian & Chenggang Xu, 2000. "Incentives, Information, and Organizational Form," Review of Economic Studies, Oxford University Press, pages 359-378.
    7. Richard Disney & Tanner, Tanner, 2000. "The abolition of the earnings rule for UK pensioners," IFS Working Papers W00/13, Institute for Fiscal Studies.
    8. Baker, Michael & Benjamin, Dwayne, 1999. "How do retirement tests affect the labour supply of older men?," Journal of Public Economics, Elsevier, pages 27-51.
    9. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, pages 832-857.
    10. Coile, Courtney & Diamond, Peter & Gruber, Jonathan & Jousten, Alain, 2002. "Delays in claiming social security benefits," Journal of Public Economics, Elsevier, pages 357-385.
      • Baland, J.M. & Robinson, J.A., 1998. "Rotten Parents," Papers 207, Notre-Dame de la Paix, Sciences Economiques et Sociales.
    11. Coile, Courtney & Diamond, Peter & Gruber, Jonathan & Jousten, Alain, 2002. "Delays in claiming social security benefits," Journal of Public Economics, Elsevier, pages 357-385.
    12. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
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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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