Abstract

http://ssrn.com/abstract=1708756
 
 

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


Luc Behaghel


Paris School of Economics; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

David M. Blau


University of North Carolina (UNC) at Chapel Hill - Department of Economics; Institute for the Study of Labor (IZA)


IZA Discussion Paper No. 5310

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 for cohorts born from 1938 to 1943. 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 are less clear-cut, but 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. We develop a simple labor supply model with reference dependence that can explain the results. The model has potentially important implications for framing of future Social Security reforms.

Number of Pages in PDF File: 61

Keywords: retirement, social security, loss aversion

JEL Classification: J26

working papers series


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Date posted: November 14, 2010  

Suggested Citation

Behaghel, Luc and Blau, David M., Framing Social Security Reform: Behavioral Responses to Changes in the Full Retirement Age. IZA Discussion Paper No. 5310. Available at SSRN: http://ssrn.com/abstract=1708756

Contact Information

Luc Behaghel (Contact Author)
Paris School of Economics ( email )
48 Boulevard Jourdan
Paris, 75014 75014
France
National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )
15 Boulevard Gabriel Peri
92245 Malakoff Cedex, 1 92245
France
David M. Blau
University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )
Gardner Hall
Chapel Hill, NC 27599
United States
919-966-3962 (Phone)
919-966-4986 (Fax)
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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