Social Security Reform and Labor Supply

A structural life-cycle retirement model with an improved specification over previous models is used to analyze and compare the long-run labor supply effects of the rules for Social Security in place in 1972,1977 and 1983, and for an actuarially fair system. The effects of separate provisions from the 1983 amendments are examined. These include the raising of the normal retirement age to 67, the increase in the delayed retirement credit to 8 percent, and the lowering of the reduction rate for earnings over the test amount to one dollar for every three dollars of earnings.