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The effect of negative income shocks on pensioners

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  • Johnsen, Julian Vedeler

    (SNF)

  • Willén, Alexander

    (Norwegian School of Economics)

Abstract

This paper provides novel evidence on the labor supply response to negative income shocks in retirement, exploiting an institutional feature that caused differential and unexpected income losses among otherwise identical individuals in a sharp regression discontinuity design. We conclude that retired pensioners do not return to work despite income losses of up to seven percent of their annual income. The paper further shows that the negative income shock had no impact on the health of pensioners. At the height of an ongoing global crisis in which public pension funds are rapidly losing value, these results may be particularly important.

Suggested Citation

  • Johnsen, Julian Vedeler & Willén, Alexander, 2021. "The effect of negative income shocks on pensioners," Working Paper Series 2021:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2021_007
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    References listed on IDEAS

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    More about this item

    Keywords

    Pension Policy; Retirement; Labor Supply; Health;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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