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Early Retirement and Economic Incentives: Evidence from a Quasi‐natural Experiment

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  • Knut Røed
  • Fredrik Haugen

Abstract

. During the 1990s, a new subsidized early retirement option was assigned quasi‐randomly to two‐thirds of Norwegian elderly workers. We use this ‘natural experiment’ to evaluate how economic incentives affect retirement behaviour. The new retirement option reduced employment substantially, and this effect escalated over time. It did not substitute for disability pension or long‐term unemployment, and approximately two out of three retirees would have stayed employed without it. Subsidized retirement was primarily voluntary, but there is also some evidence that firms took advantage of the retirement programme to ‘push out’ excess workers.

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  • Knut Røed & Fredrik Haugen, 2003. "Early Retirement and Economic Incentives: Evidence from a Quasi‐natural Experiment," LABOUR, CEIS, vol. 17(2), pages 203-228, June.
    • Handle: RePEc:bla:labour:v:17:y:2003:i:2:p:203-228
    DOI: 10.1111/1467-9914.00227
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    Cited by:

    1. Iskhakov, Fedor, 2008. "Pension Reforms in Norway: Evidence from a Structural Dynamic Model," Memorandum 14/2008, Oslo University, Department of Economics.
    2. Pål Schøne, 2009. "New technologies, new work practices and the age structure of the workers," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(3), pages 803-826, July.
    3. Holen, Dag S., 2007. "It Ain't Necessariy So," Memorandum 19/2008, Oslo University, Department of Economics.
    4. Weemes Grøtting, Maja & Lillebø, Otto, 2017. "Health Effects of Retirement: Evidence from Survey and Register Data," Working Papers in Economics 10/18, University of Bergen, Department of Economics, revised 19 Nov 2018.
    5. Hernaes, Erik & Markussen, Simen & Piggott, John & Vestad, Ola L., 2013. "Does retirement age impact mortality?," Journal of Health Economics, Elsevier, vol. 32(3), pages 586-598.
    6. Vestad, Ola Lotherington, 2013. "Labour supply effects of early retirement provision," Labour Economics, Elsevier, vol. 25(C), pages 98-109.
    7. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics.
    8. Maja Weemes Grøtting & Otto Sevaldson Lillebø, 2020. "Health effects of retirement: evidence from survey and register data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(2), pages 671-704, April.
    9. Daniel Hallberg & Matias Eklöf, 2010. "Do buy‐outs of older workers matter?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 31(3), pages 337-359, June.
    10. Ranzani, Marco, 2006. "Social Security and Labour Supply: the Italian 1992 Reform as a Natural Experiment," MPRA Paper 16569, University Library of Munich, Germany, revised Dec 2008.
    11. Johnsen, Julian V. & Vaage, Kjell, 2015. "Spouses’ retirement and the take-up of disability pension," Working Papers in Economics 03/15, University of Bergen, Department of Economics.
    12. Justina A.V. Fischer & Alfonso Sousa-Poza, 2006. "The Institutional Determinants of Early Retirement in Europe," University of St. Gallen Department of Economics working paper series 2006 2006-08, Department of Economics, University of St. Gallen.
    13. Euwals, Rob & Trevisan, Elisabetta, 2014. "Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners," IZA Discussion Papers 8466, Institute of Labor Economics (IZA).
    14. Rob Euwals & Elisabetta Trevisan, 2011. "Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners," CPB Discussion Paper 195.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Grøtting, Maja Weemes & Lillebø, Otto Sevaldson, 2017. "Health effects of retirement. Evidence from Norwegian survey and register data," Working Papers in Economics 02/17, University of Bergen, Department of Economics, revised 19 Nov 2018.
    16. Aakvik, Arild & Dahl, Svenn-Åge & Vaage, Kjell, 2005. "Late careers and career exits in Norway," Working Papers in Economics 14/05, University of Bergen, Department of Economics.
    17. Nordberg, Morten, 2007. "The Total Tax on Labour Income," Memorandum 05/2007, Oslo University, Department of Economics.
    18. Hinrichs, Karl, 2004. "Active Citizens and Retirement Planning: Enlarging Freedom of Choice in the Course of Pension Reforms in Nordic Countries and Germany," Working papers of the ZeS 11/2004, University of Bremen, Centre for Social Policy Research (ZeS).
    19. Rob Euwals & Elisabetta Trevisan, 2011. "Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners," CPB Discussion Paper 195, CPB Netherlands Bureau for Economic Policy Analysis.
    20. Dennis Fredriksen & Nils Martin Stølen, 2011. "Norwegian pension reform Defined benefit versus defined contribution," Discussion Papers 669, Statistics Norway, Research Department.

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