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Responses to Social Security by Men and Women: Myopic and Far-Sighted Behavior

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  • Cordelia Reimers
  • Marjorie Honig

Abstract

The labor supply response to critical aspects of the Social Security program depends on whether behavior is "myopic" (conditioned by current benefits only) or "far-sighted" (conditioned by the entire future benefit stream). This behavior reflects attitudes toward risk and ability to borrow, as well as underlying time preferences. The individual's effective time horizon is treated as an empirical question in this paper. Responses to the Social Security earnings test and the delayed retirement credit are examined, as well as the question of whether older men and women are able to work while keeping their earnings below the exempt earnings limit, in other words, whether the earnings test affects participation as well as hours of work. Hazard functions for labor market reentry after retirement are estimated using the Longitudinal Retirement History Study. We find striking gender differences, in that women respond to Social Security wealth and are not deterred from working by the earnings test, while men respond to current benefits and their labor force participation is impeded by the test. Increases in the delayed retirement credit, as provided by the 1983 amendments to the Social Security Act, should therefore increase the labor supply of older women but not of men, though its intention was to increase the supply of both; however, increasing or abolishing the earnings limit, as proposed in Congress, would increase older men's participation but not that of older women.

Suggested Citation

  • Cordelia Reimers & Marjorie Honig, 1996. "Responses to Social Security by Men and Women: Myopic and Far-Sighted Behavior," Journal of Human Resources, University of Wisconsin Press, vol. 31(2), pages 359-382.
  • Handle: RePEc:uwp:jhriss:v:31:y:1996:i:2:p:359-382
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    Citations

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    Cited by:

    1. Bernardo Queiroz & Laetícia Rodrigues de Souza, 2013. "Couple?s Behaviour in the Brazilian Labour Market: the Influence of Social Security and Individual Characteristics on Married Individuals? Labour Supply Decisions," Working Papers 107, International Policy Centre for Inclusive Growth.
    2. Christian N. Brinch & Erik Hernæs & Zhiyang Jia, 2017. "Salience and Social Security Benefits," Journal of Labor Economics, University of Chicago Press, vol. 35(1), pages 265-297.
    3. Hugo Benítez-Silva & Debra Sabatini Dwyer & Warren Sanderson, 2006. "A Dynamic Model of Retirement and Social Security Reform Expectations: A Solution to the New Early Retirement Puzzle," Working Papers wp134, University of Michigan, Michigan Retirement Research Center.
    4. Leora Friedberg, 2000. "The Labor Supply Effects of the Social Security Earnings Test," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 48-63, February.
    5. Leora Friedberg & Anthony Webb, 2006. "Persistence in Labor Supply and the Response to the Social Security Earnings Test," Working Papers, Center for Retirement Research at Boston College wp2006-27, Center for Retirement Research, revised Dec 2006.
    6. Hugo Benitez-Silva & Frank Heiland, 2008. "Early Retirement, Labor Supply, and Benefit Withholding: The Role of the Social Security Earnings Test," Working Papers wp183, University of Michigan, Michigan Retirement Research Center.
    7. Hugo Benitez-Silva & Debra S. Dwyer & Frank Heiland & Warren C. Sanderson, 2006. "Retirement and Social Security Reform Expectations: A Solution to the New Early Retirement Puzzle," Department of Economics Working Papers 06-05, Stony Brook University, Department of Economics.
    8. Hugo Benitez-Silva & Na Yin, 2007. "An Empirical Study of the Effects of Social Security Reforms on Claming Behavior and Benefits Receipt Using Aggregate and Public-Use Administrative Micro Data," Department of Economics Working Papers 07-05, Stony Brook University, Department of Economics.
    9. Pierre-Carl Michaud & Frederic Vermeulen, 2006. "A Collective Labor Supply Model Identification and Estimation in the Presence of Externalities By Means of Panel Data," Working Papers WR-406, RAND Corporation.
    10. repec:eee:joecag:v:9:y:2017:i:c:p:1-13 is not listed on IDEAS
    11. Pierre-Carl Michaud & Frederic Vermeulen, 2006. "A Collective Labor Supply Model Identification and Estimation in the Presence of Externalities By Means of Panel Data," Working Papers 406, RAND Corporation.
    12. Hugo Benitez-Silva & Frank Heiland, 2006. "The Social Security Earnings Test Revisited: Information, Distortions, and Costs," Department of Economics Working Papers 06-04, Stony Brook University, Department of Economics.
    13. Michaud, P.C. & Vermeulen, F.M.P., 2004. "A Collective Retirement Model : Identification and Estimation in the Presence of Externalities," Discussion Paper 2004-75, Tilburg University, Center for Economic Research.
    14. Hugo Benítez-Silva & Frank Heiland, 2007. "The social security earnings test and work incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 26(3), pages 527-555.
    15. H. Benitez-Silva & F. Heiland, 2008. "Early claiming of social security benefits and labour supply behaviour of older Americans," Applied Economics, Taylor & Francis Journals, vol. 40(23), pages 2969-2985.
    16. Jeffrey R. Brown & Arie Kapteyn & Olivia S. Mitchell, 2016. "Framing And Claiming: How Information-Framing Affects Expected Social Security Claiming Behavior," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 139-162, January.
    17. Carole Green, 2005. "Race, Ethnicity, And Social Security Retirement Age In The Us," Feminist Economics, Taylor & Francis Journals, vol. 11(2), pages 117-143.
    18. Gustman, Alan L & Steinmeier, Thomas L, 2000. "Retirement in Dual-Career Families: A Structural Model," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 503-545, July.

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