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Framing Social Security Reform: Behavioral Responses to Changes in the Full Retirement Age

Author

Listed:
  • Luc Behaghel

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • David M. Blau

    (OSU - Ohio State University [Columbus], IZA - Institute for the Study of Labor - IZA)

Abstract

We use a US Social Security reform as a quasi-experiment to provide evidence on framing effects in retirement behavior. The reform increased the full retirement age (FRA) from 65 to 66 in two-month increments per year of birth. We find strong evidence that the spike in the benefit claiming hazard at 65 moved in lockstep along with the FRA. Results on self-reported retirement and exit from employment go in the same direction. The responsiveness to the new FRA is stronger for people with higher cognitive skills. We interpret the findings as evidence of reference dependence with loss aversion.

Suggested Citation

  • Luc Behaghel & David M. Blau, 2012. "Framing Social Security Reform: Behavioral Responses to Changes in the Full Retirement Age," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00772844, HAL.
  • Handle: RePEc:hal:pseose:hal-00772844
    DOI: 10.1257/pol.4.4.41
    Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/hal-00772844
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    References listed on IDEAS

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    More about this item

    Keywords

    Intertemporal Consumer Choice; Life Cycle Models and Saving; Social Security and Public Pensions; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination; Retirement; Retirement Policies;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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