Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?

The Social Security earnings test, a version of which still applies to those ages 62-64, reduces immediate payments to beneficiaries whose labor income exceeds a given threshold. Although benefits are subsequently increased to compensate for any such reduction, the earnings test is typically perceived as a tax on working. As a result, it is considered by many to be an important disincentive to paid work for older Americans. Yet there is little evidence to suggest an economically significant effect of the earnings test on hours of work, and almost no research on the effect of the test on the decision to work at all. We investigate these issues using the significant changes in the structure of the earnings test over the past 25 years, using data over the past 25 years, using data over the 1973-1998 period from the March Supplement to the Current Population Survey (CPS), which provide large samples of observations on the elderly. Our analysis suggests two major conclusions. First, the earnings test exerts no robust influence on the labor supply decisions of men. Neither graphical analyses of breaks in labor supply trends, nor regression estimates that control for underlying trends in labor supply by age group, reveal any significant impact of changes in earnings test parameters on aggregate employment, hours of work, or earnings for men. For women, there is more suggestive evidence that the earnings test is affecting labor supply decisions. Second, loosening the earnings test appears to accelerate benefits receipt among the eligible population, lowering benefits levels, and heightening concerns about the standard of living of these elderly at very advanced ages. Our findings suggest some cause for caution before rushing to remove the earnings test at younger ages.

Barriers to saving

When the poor succeed in building up a few assets, they often find themselves disqualified from badly needed government programs. Confusing rules about IRAs and 401(k)s plus conflicting state regulations make retirement saving particularly challenging.Saving and investment ; Poverty ; Medicaid ; Social security

Toward Progressive Pensions: A Summary of the U.S. Pension System and Proposals for Reform

Toward Progressive Pensions: A Summary of the U.S. Pension System and Proposals for Refor

Climate Change: An Agenda for Global Collective Action

Over the past decade, and especially over the past few years, climate change has emerged as one of the most important issues facing the international community. A global consensus now exists that climate change represents a significant potential threat to the world's well-being. But there is disagreement about how and when to address that threat. To motivate the discussion of both the timing and magnitude of emissions mitigation policy, the paper begins with an overview of the underlying science and economics. Understanding the uncertainties and differences in the timing of costs and benefits of climate change mitigation helps frame the extensive discussion of political economy issues that we examine in the second section. Specifically, we explore the interaction of economic and political concerns in enforcing emissions commitments and encouraging developing country participation within the "voluntaristic" framework entailed by the current system of global governance. Given these political economy constraints, in the third section we evaluate the Kyoto Protocol and alternative formulations to climate change policy. We conclude that modifications to the Kyoto framework are required to advance the effort to address climate change. At the very least, a thorough re-examination of alternative frameworks may prove helpful in building a global consensus behind a more effective strategy. The final section concludes with a discussion of one promising approach to addressing climate change: a flexible hybrid system that combines a permit trading program with the ability of governments to sell additional permits at a given maximum price.Environment, Technology and Industry, Regulatory Reform, Other Topics

Saving Incentives for Low- and Middle-Income Families: Evidence from a Field Experiment with H&R Block

This paper analyzes the effects of a large randomized field experiment, carried out with H&R Block, offering matching incentives for IRA contributions at the time of tax preparation. About 15,000 H&R Block clients, in 60 offices in predominantly low- and middle-income neighborhoods in St. Louis, were randomly offered a 20 percent match on IRA contributions, a 50 percent match, or no match (the control group). The evaluation generates two broad findings. First, higher match rates significantly raise IRA participation and contributions. Take-up rates were 3 percent for the control group, 10 percent in the 20 percent match group, and 17 percent in the 50 percent match group. Average IRA contributions (excluding the match) for the 20 percent and 50 percent match groups were 4 and 8 times higher than in the control group, respectively. Second, several additional findings are inconsistent with the full-information, rational-saver model, and suggest instead that professional tax assistance, information provision, and ease of saving can play important roles in encouraging IRA contributions among low- and middle-income families. For example, we find more modest effects on take-up and amounts contributed from the existing Saverç—´ Credit, which provides an effective match for retirement saving contributions through the tax code; we suspect that the differences may reflect the complexity of the Saver's Credit as enacted, and the way in which its effective match is presented. Taken together, our results suggest that the combination of a clear and understandable match for saving, easily accessible savings vehicles, the opportunity to use part of an income tax refund to save, and professional assistance could generate a significant increase in retirement saving participation and contributions, even among middle- and low-income households.

An Economic Assessment of Tax Policy in the Bush Administration, 2001-2004

This Article analyzes the economic effects of the George W. Bush administration\u27s tax policies. It describes the 2001, 2002, and 2003 tax cuts and the proposals to make them permanent, and then explores the consequences of making the tax cuts permanent on the fiscal status of the government, the distribution of after-tax income, long-term economic growth, and the prospects for fundamental tax reform. This article also examines the role of the tax cuts as a short-term stimulus over the past few years.

College Savings Plans: A Platform for Inclusive Saving Policy?

College Savings Plans: A Platform for Inclusive Saving Policy

Budget Deficits, National Saving, and Interest Rates

macroeconomics, Budget Deficits, National Saving, Interest Rates

Dynamic analysis of regime shifts under uncertainty: Applications to hyperinflation and privatization.

Many policy decisions involve discontinuous and irreversible shifts, often in the face of substantial uncertainty. This dissertation studies two types of regime shifts under uncertainty: stabilization from hyperinflation, and privatization of a government corporation. In both cases, policy-makers face decisions that involve uncertainty and irreversibility. These topics are examined using a theoretical model (Chapter 1), econometric evidence (Chapter 2), and a case study (Chapter 3). The first chapter presents a real options model of stabilization given uncertainty over the behavior of inflation. The model is used to argue that despite the costs of hyperinflation, stabilization delays do not necessarily indicate either irrationality or the presence of political economy effects. The second chapter constructs a comprehensive data set of hyperinflations over the past 35 years. The data set is used to examine the empirical regularities of high inflation episodes, and to test the predictions of the model presented in Chapter 1. We conclude that (1) high inflation is rare; (2) most high inflation episodes are short; (3) most economies experience only one high inflation; (4) high inflation is noisy but not necessarily explosive; (5) many high inflations end without a large fall in inflation; and (6) there is weak evidence supporting the real options approach to stabilizations. The third chapter studies another type of regime shift, that of moving a corporation from public to private ownership. The proposed privatization of the U.S. Enrichment Corporation (USEC) illustrates the costs and benefits of privatization. While a private firm would be more efficient, privatization may endanger a crucial nuclear non-proliferation program of the U.S. government. The chapter examines the uranium enrichment market; analyzes the proposed privatization of USEC within a framework developed by Jones, Tandon and Vogelsang (1990); and extends the analysis to incorporate limited information and irreversibility