Towards an Actuarially Fair Pension System in Norway
AbstractIn order to estimate labour supply responses among older people we have employed a very simple model of retirement decisions that can be estimated on a single cross-section sample, and still be given a structural interpretation in terms of inter-temporal decisions. The model is estimated on Norwegian register data from 1996, which covers all Norwegians aged 55-68 in 1996. The empirical model is employed to assess the impact on retirement of moving the Norwegian pension system towards actuarial fairness. Future annual pension benefits are increased if retirement is postponed say, for one year. In one of the simulations future annual benefits are increased by NOK 8,000 (as of April 2009 1 Euro~ NOK 8.7), which is around 5 per cent of the average pension benefit in 1996 and corresponds approximately to the adjustment in the new pension system which comes into effect 1. January 2011. The number of men and women choosing retirement is reduced by around 5 per cent, given that there is no consumption smoothing. When perfect consumption smoothing is assumed the reduction is much larger; 18 per cent in the case of men and 14 per cent in the case of women. These reductions are really sizeable and indicate that pension reforms, combined with removing constraints in the credit market, may be of great importance in giving the individuals incentive to prolong their working life.
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Bibliographic InfoPaper provided by Oslo University, Department of Economics in its series Memorandum with number 09/2009.
Length: 34 pages
Date of creation: 19 Apr 2009
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC
Retirement; inter-temporal interpretation; estimates and policy simulations; Norway;
Other versions of this item:
- Ugo Colombino & Erik Hernæs & Marilena Locatelli & Steinar Strøm, 2009. "Towards an actuarially fair pension system in Norway," CHILD Working Papers wp14_09, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
- D10 - Microeconomics - - Household Behavior - - - General
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-09-11 (Economics of Ageing)
- NEP-ALL-2009-09-11 (All new papers)
- NEP-LAB-2009-09-11 (Labour Economics)
You can help add them by filling out this form.
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