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Pension incentives and labor supply: Evidence from the introduction of universal old-age assistance in the UK

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  • Giesecke, Matthias
  • Jäger, Philipp

Abstract

We study the labor supply implications of the Old-Age Pension Act (OPA) of 1908, which, for the first time, provided pensions to older people in the UK. Using recently released census data covering the entire population, we exploit variation at the newly created age-based eligibility threshold. Our results show a considerable and abrupt decline in labor force participation of 6.0 percentage points (13%) when older workers reach the eligibility age of 70. To mitigate the impact of population aging today, pension reforms aimed at increasing elderly labor supply, however, have to induce much larger behavioral responses than the OPA.

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  • Giesecke, Matthias & Jäger, Philipp, 2021. "Pension incentives and labor supply: Evidence from the introduction of universal old-age assistance in the UK," Journal of Public Economics, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:pubeco:v:203:y:2021:i:c:s0047272721001523
    DOI: 10.1016/j.jpubeco.2021.104516
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    3. Cetin, Sefane & Hindriks, Jean, 2023. "Sustainability of pension reforms: An EU-wide political stress," LIDAM Discussion Papers CORE 2023016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    More about this item

    Keywords

    Old-Age Assistance; Labor Supply; Retirement; Regression Discontinuity Design;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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