Date of Award

2016

Document Type

Open Access Dissertation

Department

Moore School of Business

Sub-Department

Economics

First Advisor

McKinley L. Blackburn

Abstract

Three changes in the U.S. Social Security program affected recent cohorts of older individuals: repeal of the earnings test, increases in the normal retirement age, and increases in the delayed retirement credit. All three policy changes were expected to affect work decisions for those eligible for social security benefits. The first two chapters of my dissertation assess the impact of these policy changes. In the first chapter, using data from the Survey of Income Program and Participation (SIPP) for the years 1996-2013, I study the influence of the three policy changes on the retirement and benefit-claiming decisions of older men and women. There is minimal evidence in the recent literature investigating the sensitivity of estimated responses to the definition of retirement. In particular, I explore how responses to the policy changes differ when assessed using an objective relative to a subjective definition of retirement. The evidence from the empirical analysis indicates that the response to these policy changes is partly sensitive to the retirement definition. I find no effect of recent policy changes on retirement based on a labor force definition, while changes in the delayed retirement credit reduce self-reported retirement among men and women above the normal retirement age. There is stronger evidence of an effect of recent policy changes on the claiming behavior of older individuals. The earnings test repeal raised claiming among men above the normal retirement age, and changes in the delayed retirement credit reduced claiming among men and women who are directly affected.

The second chapter examines the influence of the earnings test on the labor supply decisions of older workers. In analyzing the labor supply response to the earnings test, previous researchers have used a static labor supply framework and ignored the possible influence of the delayed retirement credit adjustments in mitigating the earnings test penalty. In contrast to the past research, I assess the labor supply response to the earnings test within a life-cycle model that accounts for the delayed retirement credit adjustments. Using data from the SIPP covering years 1996-2013, I consider the effect on both labor force participation and hours of work. Two potential responses to the policy changes have been relatively less studied: the intertemporal response by individuals and the differential response by sub-groups of individuals who possibly face liquidity constraints or misunderstand the rules of the earnings test. In my work, I provide evidence on both these responses. I find evidence in support of the view that both men and women perceive the earnings test as a tax, as older men and women above the normal retirement age and below age 70 respond to the earnings test by reducing their labor force participation. For working women, I also observe a reduction in the hours of work in response to the earning test, which indicates the somewhat greater flexibility in the choice of hours of work that may be available to women relative to men.

The third chapter draws on reports of a rise in the share of young people living with their parents during and following the period after the 2007-2009 recession in the U.S. Previous research has analyzed the relationship between changes in economic conditions and living arrangements of young people by focusing on data based on infrequent (annual/biennial) interviews. In my empirical analysis I use high frequency SIPP data for the years 1996-2013. I examine the change in a young adult’s likelihood of living with a parent in response to changes in local labor-market conditions, and further identify the breakdown of this change into young adults returning home versus their changing their tendency to leave the parental home. Unlike, previous researchers I find no robust evidence that poor labor markets conditions affect the living arrangements of young adults.

Rights

© 2016, Anudeep Gill

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