NBER Working Papers by Daniel W. Sacks

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October 2013Earnings Adjustment Frictions: Evidence from the Social Security Earnings Test
with Alexander M. Gelber, Damon Jones: w19491
We study frictions in adjusting earnings in response to changes in the Social Security Annual Earnings Test (AET), using a one percent sample of earnings histories from Social Security Administration microdata from 1983 to 1999. Individuals continue to "bunch" at the convex kink the AET creates even when they are no longer subject to the AET, demonstrating that adjustment frictions help drive behavior in a new and important context. We develop a novel framework for estimating an earnings elasticity and an adjustment cost using information on the amount of bunching at kinks before and after policy changes in earnings incentives around the kinks. We apply this method in settings in which individuals face changes in the AET benefit reduction rate, and we estimate in a baseline case that the e...
October 2010Subjective Well-Being, Income, Economic Development and Growth
with Betsey Stevenson, Justin Wolfers: w16441
We explore the relationships between subjective well-being and income, as seen across individuals within a given country, between countries in a given year, and as a country grows through time. We show that richer individuals in a given country are more satisfied with their lives than are poorer individuals, and establish that this relationship is similar in most countries around the world. Turning to the relationship between countries, we show that average life satisfaction is higher in countries with greater GDP per capita. The magnitude of the satisfaction-income gradient is roughly the same whether we compare individuals or countries, suggesting that absolute income plays an important role in influencing well- being. Finally, studying changes in satisfaction over time, we find that...

Published: “Income, Growth, and Subjective Well-Being.” Development Challenges in a Post-Crisis World, World Bank, Washington D.C., 2010. With Betsey Stevenson and Justin Wolfers.

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