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How Did the Elimination of the Earnings Test above the Normal Retirement Age Affect Retirement Expectations?

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  • Michaud, Pierre-Carl

    (HEC Montreal)

  • van Soest, Arthur

    (Tilburg University)

Abstract

We look at the effect of the 2000 repeal of the earnings test above the normal retirement age (NRA) on retirement expectations of male workers in the Health and Retirement Study (HRS). Using administrative records on Social Security benefit entitlements linked to the HRS survey data, we can distinguish groups of respondents according to how, before the repeal, the earnings test would have affected their marginal wage rate after the NRA. We use panel data models with fixed and random effects to investigate the effect of the repeal on the subjective probability to work full-time after the NRA as well as after age 62. We find that male workers whose marginal wage rate increased because the earnings test was repealed, had the largest increase in this probability. We find no significant effects of the repeal on the probability to work full-time past age 62. Since the tax introduced by the earnings test was small when accounting for actuarial benefit adjustments, our results suggest that male workers misperceive the complicated rules of the earnings test.

Suggested Citation

  • Michaud, Pierre-Carl & van Soest, Arthur, 2007. "How Did the Elimination of the Earnings Test above the Normal Retirement Age Affect Retirement Expectations?," IZA Discussion Papers 2868, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp2868
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    References listed on IDEAS

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    Cited by:

    1. Hernæs, Erik & Jia, Zhiyang, 2009. "Labour Supply Response of a Retirement Earnings Test Reform," Memorandum 25/2009, Oslo University, Department of Economics.
    2. Jeffrey B. Liebman & Erzo F. P. Luttmer, 2012. "The Perception of Social Security Incentives for Labor Supply and Retirement: The Median Voter Knows More Than You'd Think," Tax Policy and the Economy, University of Chicago Press, vol. 26(1), pages 1-42.
    3. Bo MacInnis, 2009. "Social Security and the Joint Trends in Labor Supply and Benefits Receipt Among Older Men," Working Papers, Center for Retirement Research at Boston College wp2009-22, Center for Retirement Research, revised Oct 2009.

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    More about this item

    Keywords

    panel data; retirement; difference in differences; social security earnings test; expectations;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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