NB20-07: Retirement Benefits and Incentives for Work: New Evidence from Eligibility Criteria

In order to be eligible for Social Security retirement benefits in old age, individuals must have earned at least 40 credits of work during their lifetime, the approximate equivalent of 10 years of employment.7 How salient is this eligibility requirement for individuals close to the retirement age, and how does it affect their labor force participation? To my knowledge, no prior work has studied these questions, and my projects aims to fill this gap.
Theoretically, individuals should have the incentive to work for at least 10 years to qualify for retirement benefits if they value retirement benefits, are informed about eligibility rules, and are able to work. This should lead to extra mass density, or bunching, at 40 credits of work. I therefore plan to use Social Security Administration (SSA) data to empirically measure bunching behavior around this threshold. If instead
individuals are not informed about this eligibility requirement, the work history rule will lead to a sharp discontinuity in Social Security retirement benefit eligibility. I will therefore use a regression discontinuity design (RDD) to analyze how eligibility for retirement benefits affects labor force participation and mortality among the elderly affected by this requirement, a group which has never been studied in prior work.