Using Nonlinear Budget Sets to Estimate Extensive Margin Responses: Method and Evidence from the Earnings Test

• 成果类型: Article
• 署名作者: Gelber, Alexander M.; Jones, Damon; Sacks, Daniel W.; Song, Jae
• 署名单位: University of California System; University of California San Diego; National Bureau of Economic Research; University of Chicago; Indiana University System; Indiana University Bloomington; IU Kelley School of Business
• 刊物名称: AMERICAN ECONOMIC JOURNAL-APPLIED ECONOMICS
• ISSN/ISSBN: 1945-7782
• DOI: 10.1257/app.20180811
• 发表日期: 2021
• 页码: 150-193
• 关键词: social-security; UNITED-STATES; LABOR; retirement; elasticities; welfare; DESIGN; COSTS; micro

摘要

We estimate the impact of the Social Security Annual Earnings Test (AET) on older workers' employment. The AET reduces social security claimants' current benefits in proportion to their earnings in excess of an exempt amount. Using a regression kink design and Social Security Administration data, we document that the discontinuous change in the benefit reduction rate at the exempt amount causes a corresponding change in the slope of the employment rate, suggesting that the extensive margin of labor supply is more sensitive to this policy than commonly thought. We develop a model and method that allow us to translate the behavioral responses into a lower bound estimate of 0.49 for the extensive margin elasticity, which implies more than a 1 percentage point increase in work in the absence of the AET.