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Pension Reforms in Norway: Evidence from a Structural Dynamic Model

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  • Iskhakov, Fedor

    () (Ragnar Frisch Centre for Economic Research)

Abstract

This paper simulates a set of proposed policies from the Norwegian pension reform within a structural dynamic model of health and retirement estimated on the Norwegian labour market data. The paper focuses on the two main elements of the reform, namely the new pension entitlement accrual rules linking benefits more closely to earnings and the new pension benefit drawing rules designed to eliminate the incentives distortions with respect to the time of retirement. The effects of these proposals are investigated in terms of labour market outcomes, social welfare and income distribution. It is shown that while the proposed pension reform succeeds in urging the older workers to postpone their retirement and induces an increase in total social welfare, individuals in good health who retire early experience a negative change in their discounted utility. In addition, an increase in social welfare is accompanied with an increase in income inequality.

Suggested Citation

  • Iskhakov, Fedor, 2008. "Pension Reforms in Norway: Evidence from a Structural Dynamic Model," Memorandum 14/2008, Oslo University, Department of Economics.
  • Handle: RePEc:hhs:osloec:2008_014
    as

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    File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2008/Memo-14-2008.pdf
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    References listed on IDEAS

    as
    1. Hiedemann, Bridget, 1998. "A Stackelberg model of Social Security acceptance decisions in dual career households," Journal of Economic Behavior & Organization, Elsevier, vol. 34(2), pages 263-278, February.
    2. Espen Bratberg & Tor Helge Holmås & Øystein Thøgersen, 2004. "Assessing the effects of an early retirement program," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(3), pages 387-408, August.
    3. Bratberg, E. & Holmas, T.H. & Thogersen, O., 2000. "Assessing the Effects of Early Retirement Programs," Papers 4/2000, Norwegian School of Economics and Business Administration-.
    4. Bratberg, Espen, 1999. " Disability Retirement in a Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 97-114, March.
    5. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    6. 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.
    7. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics.
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    More about this item

    Keywords

    Pension reform; incentive neutral retirement; pension entitlement accrual rules; labour market outcomes; social welfare; income inequality; structural dynamic model; health; retirement;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • 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

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