NBER's 23rd Tax Policy and the Economy Conference held in Washington.

• Position: Conferences - Conference news

The NBER's 23rd Conference on Tax Policy and the Economy took place at the National Press Club in Washington on September 25. NBER Research Associate Jeffrey R. Brown of the University of Illinois at Urbana-Champaign and NBER President James M. Poterba of MIT organized this year's meeting. The following papers were discussed:

Leora Friedberg, University of Virginia and NBER, and Anthony Webb, Boston College, "New Evidence on the Labor Supply Effects of the Social Security Earnings-Test"

Jeffrey R. Brown and Don Fullerton, University of Illinois and NBER, and Julia L. Coronado, Barclays Global Investors, "Is Social Security Part of the Social Safety Net?"

Rosanne Altshuler, Rutgers University; Alan J. Auerbach, University of California, Berkeley and NBER; and Michael Cooper and Matthew

Knittel, U.S. Department of Treasury, "Understanding U.S. Corporate Tax Losses"

James R. Hines, Jr., University of Michigan and NBER, and Lawrence H. Summers, Harvard University and NBER, "How Globalization Affects Tax Design"

1. Abigail Payne, McMaster University, "Empirical Analysis of Crowd-Out"

Friedberg and Webb investigate the impact on labor supply of changes in the Social Security earnings test in 1996 and 2000. They highlight how inertia in labor supply choices can influence the responses to policy changes in two ways: First, they show that taking account of previous employment status is important in estimating responses to any current earnings-test changes. Second, they test the effect of both actual and anticipated earnings-test parameters that cohorts faced at earlier ages. This approach demonstrates that both past and anticipated future rules can influence current employment and earnings. Thus, Friedberg and Webb identify an impact of earnings-test changes on employment not only contemporaneously for those at the ages directly affected, but also for those at younger ages and in the years that follow the direct change. Finally, the researchers show that earnings-test changes initiated in 1996, like the changes in 2000 that have been studied by others, affected labor supply. Overall, Friedberg and Webb predict that the elimination of the earnings-test in 2000 raised employment among Health and Retirement Study respondents by around 2 percentage points at ages 66 to 69 and 3.5 points at age 65. These gains persisted as exposed cohorts aged and were also observed at younger ages because of the shock to anticipated earnings-test rules.

Expanding on earlier work, Brown and his co-authors develop a large sample of individuals born at different times, construct an entire lifetime earnings history for each individual, and then develop several measures by which to classify each individual's lifetime economic status. Then, they calculate each individual's Social Security taxes and retirement benefits, and use several measures of the impact of the Social Security retirement program on "the poor." Their four major findings are: first, as the definition of income becomes more comprehensive, Social Security's retirement program becomes, overall, less progressive. Indeed, by using "potential" labor earnings (defined as an individual's labor endowment multiplied by the individual's wage rate) at the household level rather than actual earnings at the individual level, the researchers find that Social Security has virtually no effect on overall inequality. Second, this result is driven largely...