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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.The MIT Press is collaborating with JSTOR to digitize, preserve and extend access to The Review of Economics and Statistics. http://www.jstor.org THE LABOR SUPPLY EFFECTS OF THE SOCIAL SECURITY EARNINGS TESTLeora Friedberg* Abstract-The Social Security earnings test taxes away benefits at a 33%-50% rate once earnings pass a threshold amount. I investigate the response to three past changes in the earnings test rules, each applying to some age groups and not others. I find that beneficiaries bunch in substantial numbers just below the earnings threshold, and the bunching shifts when the earnings test rules change. These shifts in the budget constraint are incorporated into an econometric model to identify income and substitution effects. The estimation yields significant elasticities that suggest considerable deadweight loss suffered by working beneficiaries.

Defined benefit pension plans have become considerably less common since the early 1980s, while defined contribution plans have spread. Previous research showed that defined benefit plans, with sharp incentives encouraging retirement after a certain point, contributed to the striking postwar decline in American retirement ages. In this paper we find that the absence of age-related incentives in defined contribution plans leads workers to retire almost two years later on average, compared to workers with defined benefit plans. Thus, the evolution of pension structure can help explain recent increases in employment among people in their 60s, after decades of decline.