Earnings Distribution and Labour Supply after a Retirement Earnings Test Reform*

Hernæs, Erik; Jia, Zhiyang

doi:10.1111/j.1468-0084.2012.00695.x

Cited by 15 publications

(16 citation statements)

References 18 publications

(39 reference statements)

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“…Our empirical modelling approach is in fact a version of the "distribution regression models" discussed by Chernozhukov et al (2013). See also Hernaes and Jia (2013) or Havnes and Mogstad (2015) for detailed discussions of this approach and its relationship with standard conditional quantile treatment models.…”

Section: Empirical Approachmentioning

confidence: 99%

“…It is still conceivable that labor market institutions, such as working time regulations and minimum wage regulations, may affect different segments of labor market differently, so that adjustments around the accrual threshold at $10,000 is quite difficult. However, Hernaes and Jia (2013) found that the elderly were able to adjust their earnings around the $10,000 threshold in a study of an earnings test reform in Norway in 2002.…”

Section: Frictionsmentioning

confidence: 99%

“…First, it only considers the effect on one particular extensive margin, labor market re-entry. As documented in a number of studies, such as Song and Manchester (2007) and Hernaes and Jia (2013), changes in incentives might have a positive effect on the intensive margin, without affecting the extensive margin. Second, in Reimers and Honig (1996), both current pensions and social security wealth enter the analysis as exogenous regressors.…”

Section: Introductionmentioning

confidence: 95%

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Salience and Social Security Benefits

Brinch

Hernæs

Jia

2017

Journal of Labor Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe study the effect of salience in the social security benefit system on labor earnings by exploiting kinks and notches in budget lines introduced by earnings testing and social security accrual mechanisms for 67-69 year old workers in Norway. An earnings test had large effects on labor earnings, while an accrual system discontinuity had no discernible effects. We interpret the difference as likely to be caused by a lack of salience in the accrual incentives: agents are not able or willing to take into account the value of future benefit increases when considering the relevant rewards to working..

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Section: Empirical Approachmentioning

confidence: 99%

Section: Frictionsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 95%

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Salience and Social Security Benefits

Brinch

Hernæs

Jia

2017

Journal of Labor Economics

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“…supply. Studies such as Friedberg (2000), Tran (2002), Steinmeier (2008), Michaud (2008), Haider and Loughran (2008), Friedberg and Webb (2009) and Engelhardt and Kumar (2009) for the US, Baker and Benjamin (1999) for Canada, Disney and Smith (2002) for the UK, Shimizutani and Oshio (2013) for Japan, and Brinch et al (2012) and Hernaes and Jia (2013) for Norway show that the abolishment of an earnings test has led to an increase in labor supply.…”

Section: New Zealandmentioning

confidence: 99%

Earnings Test, Non-actuarial Adjustments and Flexible Retirement

Axel¹,

Härtl²,

Leite³

2018

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We are grateful to Alexander Ludwig for advice on the computational algorithm. We thank Tabea ABSTRACTIn response to the challenges of increasing longevity, an obvious policy response is to gradually increase the statutory eligibility age for public pension benefits and to shut down pathways to early retirement such as special rules for women. This is, however, very unpopular. As an alternative, many countries have introduced "flexibility reforms" which allow combining parttime work and partial retirement. A key measure of these reforms is the abolishment of earnings tests. It is claimed that these reforms increase labor supply and therefore, also the sustainability of pension systems. We show that these claims may not be true in the circumstances of most European countries.To this end, we employ a life-cycle model of consumption and labor supply where the choices of labor force exit and benefit claiming age are endogenous and potentially separate. Earnings tests force workers to exit the labor market when claiming a pension. After abolishing the earnings test, workers can claim their benefits and can keep on working, potentially increasing labor supply. Our key result is that the difference between exit and claiming age strongly depends on the actuarial neutrality of the pension system and can become very large. Abolishing an earnings test as part of a "flexibility reform" may therefore create more labor supply but at the same time, reduce the average claiming age when adjustments remain less than actuarial, thereby worsening rather than improving the sustainability of public pension systems.

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“…In the current system there is no deferral, so the earnings test can be viewed as a "real" tax. Hernaes & Jia (2009) analyse the changes in earnings following the reform implemented in 2002, which doubled the wage threshold for the earnings test, using administrative registers, spanning the years 1999-2003, covering many socioeconomic dimensions of the whole population and containing extensive information on employment and income. In broad terms, their analysis indicates a positive labour supply response to the earnings test reform.…”

Section: Pensions and Social Security Legislationmentioning

confidence: 99%