NBER Working Papers by Daniel W. Sacks

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

Working Papers

April 2017Using Kinked Budget Sets to Estimate Extensive Margin Responses: Evidence from the Social Security Earnings Test
with Alexander M. Gelber, Damon Jones, Jae Song: w23362
We develop a method for estimating the effect of a kinked 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 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 elasticity point estimate for the A...
November 2016Intertemporal Substitution in Health Care Demand: Evidence from the RAND Health Insurance Experiment
with Haizhen Lin: w22802
Nonlinear cost-sharing in health insurance encourages intertemporal substitution be- cause patients can reduce their out-of-pocket costs by concentrating spending in years when they hit the deductible. We test for such intertemporal substitution using data from the RAND Health Insurance Experiment, where people were randomly assigned either to a free care plan or to a cost-sharing plan which had coinsurance up to a maximum dollar expenditure (MDE). Hitting the MDE—leading to an effective price of zero—has a bigger effect on monthly health care spending and utilization than does being in free care, because people who hit the MDE face high future and past prices. As a result, we estimate that sensitivity to short-lasting price changes is about twice as large as sensitivity to long-lasting ch...
October 2013Earnings Adjustment Frictions: Evidence from the Social Security Earnings Test
with Alexander M. Gelber, Damon Jones: w19491
Recent literature has documented that individuals face frictions in adjusting their earnings with respect to policy, but this literature has not yet developed a method for estimating earnings adjustment costs. We introduce a method for estimating the cost of adjusting earnings, as well as the elasticity of earnings with respect to the incentive to earn. Our method uses information on the amount of bunching in the earnings distribution at convex budget set kinks before and after policy changes in the earnings incentives around the kinks: the larger is the adjustment cost, the smaller is the absolute change in bunching from before to after the policy change. We apply this method in the context of the convex kink created by the Social Security Annual Earnings Test (AET). Using a one percent s...
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.

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us