How Did the Elimination of the US Earnings Test Above the Normal Retirement Age Affect Labour Supply Expectations?

Published in: Fiscal studies, v. 29, no. 2, June 2008, p. [197]-231

Posted on RAND.org on December 31, 2007

by Pierre-Carl Michaud, Arthur van Soest

The authors looked at the effect of the 2000 repeal of the earnings test above the normal retirement age (NRA) on the self-reported probabilities of working full-time after ages 65 and 62 of male workers in the US Health and Retirement Study (HRS). Using administrative records on social security benefit entitlements linked to the HRS survey data, they could distinguish groups of respondents according to the predicted effect of the earnings test before its repeal on their marginal wage rate after the NRA. They used panel data models with fixed and random effects to investigate the effect of the repeal. The authors found that male workers whose predicted marginal wage rate increased because the earnings test was repealed had the largest increase in the subjective probability of working full-time after age 65. They found no significant effects of the repeal on the subjective probability of working full-time past age 62.

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