The Repeal of the Retirement Earnings Test and the Labor Supply of Older Men

33 Pages Posted: 12 Nov 2008  

Gary V. Engelhardt

Syracuse University - Center for Policy Research; Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Anil Kumar

Federal Reserve Bank of Dallas - Research Department

Date Written: May 2007

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). Based on reduced-form specifications, we find that the repeal of the earnings test increased labor supply on the intensive margin by 12-17%, the bulk of which was concentrated among men with a high-school degree, whose labor supply rose by 19-26%. We formulate a unique test for endogenous reporting of health status by examining how reported health changes with the repeal of the earnings test. We find some evidence of endogenous self-reported health status. In particular, older men were substantially less likely to have reported that health limits their ability to work after, relative to before the earnings test repeal, with the bulk of the effect concentrated among men with high-school degrees, who had the largest labor-supply response to the repeal.

Suggested Citation

Engelhardt, Gary V. and Kumar, Anil, The Repeal of the Retirement Earnings Test and the Labor Supply of Older Men (May 2007). Available at SSRN: https://ssrn.com/abstract=1299703 or http://dx.doi.org/10.2139/ssrn.1299703

Gary V. Engelhardt (Contact Author)

Syracuse University - Center for Policy Research ( email )

426 Eggers Hall
Syracuse, NY 13244
United States
315-443-4598 (Phone)
315-443-1081 (Fax)

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Anil Kumar

Federal Reserve Bank of Dallas - Research Department ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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