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The Social Security Earnings Test Removal. Money Saved or Money Spent by the Trust Fund?

  • Giovanni Mastrobuoni

    ()

    (Collegio Carlo ALberto and Center for Research on Pensions and Welfare Policies, Turin)

Beneficiaries of Social Security face restrictions on how much they can earn without incurring the earnings test (ET). In 2000, President Clinton eliminated the ET between age 65 and 70. In this paper I evaluate how this removal impacts the long-term finances of the Trust Fund. I find that starting in 2006 the Social Security Administration is actually saving money and that the removal appears to be Pareto-efficient. A removal of the remaining part of the ET is likely to be even less costly and to produce larger increases in labor supply and contributions.

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Paper provided by Center for Research on Pensions and Welfare Policies, Turin (Italy) in its series CeRP Working Papers with number 51.

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Length: 29 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:crp:wpaper:51
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  1. Olivia S. Mitchell & James M. Poterba & Mark J. Warshawsky, 1997. "New Evidence on the Money's Worth of Individual Annuities," NBER Working Papers 6002, National Bureau of Economic Research, Inc.
  2. Honig, Marjorie & Reimers, Cordelia, 1989. "Is It Worth Eliminating the Retirement Test?," American Economic Review, American Economic Association, vol. 79(2), pages 103-07, May.
  3. Song, Jae G. & Manchester, Joyce, 2007. "New evidence on earnings and benefit claims following changes in the retirement earnings test in 2000," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 669-700, April.
  4. Michael Hurd & James P. Smith & Julie M. Zissimopoulos, 2003. "The Effects of Subjective Survival on Retirements and Social Security Claiming," Working Papers 03-11, RAND Corporation Publications Department.
  5. Jonathan Gruber & Peter Orszag, 2000. "Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?," NBER Working Papers 7923, National Bureau of Economic Research, Inc.
  6. 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 755-73, December.
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