Family labour supply when the husband is eligible for early retirement

When the husband works in the private sector in Norway the take-up rate of early retirement during the first twelve months after becoming eligible (once during 1993 and 1994) was around 40 percent. If the husband works in the public sector the corresponding take-up rate was around 25 percent. A model with forward-looking and utility maximising merried couples, where the husband only is eligible for early retirement, has been estimated on these data. The estimated model has been used to predict the labour supply responses of the husband and wife when pensions are taxed as wage earnings. Taxing early benefits as labour earnings induces a substantial decline in retirement and a substantial shift towards full-time work among males. Females tent to decrease their labour supply a little. An additionsl 10 percent in the pre-tax pensionincome has a positive impact on full-time work among both spouses, but the effect is a magnitude smaller than the effect obtained by changing taxation. Husbands in poor households tend to increase their labour supply more than husbands in rich households. Poor households are also more negatively hit in terms of loss in expected household welfare than the rich households.