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

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 6569, on the labor supply of older men using data from the 19962004 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. © 2008 Cambridge University Press.