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The Repeal of the Retirement Earnings Test and the Labor Supply of Older Men

  • Gary V. Engelhardt
  • Anil Kumar

    ()

    (Federal Reserve Bank of Dallas)

This paper examines the impact of the Senior Citizens Freedom to Work Act of 2000, which abolished the Social Security retirement earnings test for those aged 65-69, on the labor supply of older men using data from the 1996-2004 waves of the Health and Retirement Study (HRS). Based on reduced-form specifications, we find that the repeal of the earnings test increased labor supply on the intensive margin by 12-17%, the bulk of which was concentrated among men with a high-school degree, whose labor supply rose by 19-26%. We formulate a unique test for endogenous reporting of health status by examining how reported health changes with the repeal of the earnings test. We find some evidence of endogenous self-reported health status. In particular, older men were substantially less likely to have reported that health limits their ability to work after, relative to before the earnings test repeal, with the bulk of the effect concentrated among men with high-school degrees, who had the largest labor-supply response to the repeal.

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File URL: http://crr.bc.edu/working-papers/the-repeal-of-the-retirement-earnings-test-and-the-labor-supply-of-older-men/
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Paper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number wp2007-01.

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Length: 29 pages
Date of creation: May 2007
Date of revision: May 2007
Handle: RePEc:crr:crrwps:wp2007-01
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  1. 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.
  2. David S. Loughran & Steven Haider, 2007. "Do the Elderly Respond to Taxes on Earnings? Evidence from the Social Security Retirement Earnings Test," Working Papers 223-1, RAND Corporation Publications Department.
  3. Alan L. Gustman & Thomas L. Steinmeier, 2004. "The social Security Retirement Earnings Test, Retirement and Benefit Claiming," NBER Working Papers 10905, National Bureau of Economic Research, Inc.
  4. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  5. J. Hausman, 1979. "The Effect of Wages, Taxes and Fixed Costs on Women's Labor Force Participation," Working papers 238, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Alan Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, . "Retirement Measures in the Health and Retirement Survey," Pension Research Council Working Papers 94-2, Wharton School Pension Research Council, University of Pennsylvania.
  7. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(2), pages 238-249, April.
  8. 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.
  9. Michael D. Hurd, 1993. "The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers," NBER Working Papers 4462, National Bureau of Economic Research, Inc.
  10. 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.
  11. Card, David, 1990. "Labor supply with a minimum hours threshold," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 33(1), pages 137-168, January.
  12. Jonah B. Gelbach & Doug Miller, 2009. "Robust Inference with Multi-way Clustering," Working Papers 99, University of California, Davis, Department of Economics.
  13. Cogan, John F, 1981. "Fixed Costs and Labor Supply," Econometrica, Econometric Society, vol. 49(4), pages 945-63, June.
  14. 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 209-36, April.
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