EconPapers    
Economics at your fingertips  
 

Using Non-Linear Budget Sets to Estimate Extensive Margin Responses: Method and Evidence from the Social Security Earnings Test

Alexander Gelber (), Damon Jones, Daniel W. Sacks and Jae Song ()

No 23362, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a method for estimating the effect of a kinked or notched budget set on workers’ employment decisions, and we use it to estimate the impact of the Social Security Old-Age and Survivors Insurance (OASI) Annual Earnings Test (AET). The AET reduces OASI claimants’ current OASI 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. We develop conditions in a general setting under which we can use such patterns to estimate the elasticity of the employment rate with respect to the effective average net-of-tax rate. Our resulting point estimate for the AET indicates an elasticity of at least 0.49, suggesting that the AET reduces employment by more than one percentage point in the group we study.

JEL-codes: H24 H31 H55 J14 J22 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-age, nep-lma and nep-pbe
Note: AG LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w23362.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:23362

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w23362

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-07-23
Handle: RePEc:nbr:nberwo:23362