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The repeal of the retirement earnings test and the labor supply of older men

Published online by Cambridge University Press:  27 January 2009

GARY V. ENGELHARDT  and
ANIL KUMAR
GARY V. ENGELHARDT*
Affiliation:
Department of Economics and Center for Policy Research, Maxwell School for Citizenship and Public Affairs, Syracuse University (e-mail: gvengelh@maxwell.syr.edu)
ANIL KUMAR
Affiliation:
Research Department, Federal Reserve Bank of Dallas (e-mail: anil.kumar@dal.frb.org)
*
*Corresponding author.
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Abstract

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). We use the fine structure of the 2000 Act to develop a new measure of exposure to the earnings test that varies across calendar years both by month and year of birth. We find that much, if not all, of the labor-supply response occurred for sub-groups of men who, either because of high mortality risk, high rates of pure time preference, or liquidity constraints, may have found the actuarial adjustment built into the earnings test relatively disadvantageous, particularly the lesser educated.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 8 , Issue 4 , October 2009 , pp. 429 - 450
Copyright
Copyright © 2009 Cambridge University Press

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