Earnings Adjustment Frictions : Evidence from the Social Security Earnings Test

@inproceedings{Gelber2013EarningsAF,
  title={Earnings Adjustment Frictions : Evidence from the Social Security Earnings Test},
  author={Alexander M. Gelber and Damon Jones and Daniel W. Sacks},
  year={2013}
}
We study frictions in adjusting earnings to changes in the Social Security Annual Earnings Test (AET) using a panel of Social Security Administration microdata on one percent of the U.S. population from 1961 to 2006. Individuals continue to "bunch" at the convex kink the AET creates even when they are no longer subject to the AET, consistent with the existence of earnings adjustment frictions in the U.S. We develop a novel framework for estimating an earnings elasticity and an adjustment cost… CONTINUE READING
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