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Social Security Earnings Test And The Labor Supply Of The Elderly: New Evidence From Unique Survey Responses In Japan

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Executive Summary

Although there exists a large volume of literature on the subject, a consensus on the labor supply effects of the social security earnings test for the elderly has yet to be reached. This paper proposes an alternative approach of utilizing direct responses to a survey on the earnings test, a unique feature of the dataset compiled by the Japanese Government, to provide new evidence on the sensitivity of the labor supply decision of workers aged between 60 and 64 with respect to the earnings test. The empirical results show that a large proportion of these workers are discouraged from working or reduce their working hours, even after correcting for observed attributes of individuals who reported either affected or unaffected.

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