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American Economic Journal: Economic Policy: Vol. 4 No. 4 (November 2012)

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Framing Social Security Reform: Behavioral Responses to Changes in the Full Retirement Age

Article Citation

Behaghel, Luc, and David M. Blau. 2012. "Framing Social Security Reform: Behavioral Responses to Changes in the Full Retirement Age." American Economic Journal: Economic Policy, 4(4): 41-67.

DOI: 10.1257/pol.4.4.41

Abstract

We use a US Social Security reform as a quasi-experiment to provide evidence on framing effects in retirement behavior. The reform increased the full retirement age (FRA) from 65 to 66 in two-month increments per year of birth. We find strong evidence that the spike in the benefit claiming hazard at 65 moved in lockstep along with the FRA. Results on self-reported retirement and exit from employment go in the same direction. The responsiveness to the new FRA is stronger for people with higher cognitive skills. We interpret the findings as evidence of reference dependence with loss aversion. (JEL D91, H55, J14, J26)

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Authors

Behaghel, Luc (Paris School of Economics)
Blau, David M. (OH State U and IZA, Bonn)

JEL Classifications

D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
H55: Social Security and Public Pensions
J14: Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
J26: Retirement; Retirement Policies

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