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The E ffect of Age-Targeted Tax Credits on Retirement Behavior

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  • Laun, Lisa

    () (Dept. of Economics, Stockholm University)

Abstract

This paper analyzes the eff ect of two age-targeted policy initiatives to delay retirement that were simultaneously implemented in Sweden in 2007: an earned income tax credit and a payroll tax credit. Both policies were targeted at workers aged 65 or above at the beginning of the tax year. The paper exploits that the special rules for elderly were governed by the year of birth while the social security system is governed by age at retirement, i.e., the day of birth, in analyzing the eff ect of the new policies. The results suggest that the age-targeted tax credits increased employment in the year following the 65th birthday by 1.5 percentage points among individuals with annual earnings above the 2007 tax liability threshold three to five years earlier. An analysis of fiscal implications indicates, however, that the increase in employment was not large enough to off set the implied decrease in tax revenues.

Suggested Citation

  • Laun, Lisa, 2012. "The E ffect of Age-Targeted Tax Credits on Retirement Behavior," Research Papers in Economics 2012:14, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2012_0014
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    References listed on IDEAS

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    1. Holmlund, Helena, 2007. "A Researcher's Guide to the Swedish Compulsory School Reform," Working Paper Series 9/2007, Stockholm University, Swedish Institute for Social Research.
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    4. Mårten Palme & Ingemar Svensson, 2007. "Financial Implications of Income Security Reforms in Sweden," NBER Chapters,in: Social Security Programs and Retirement around the World: Fiscal Implications of Reform, pages 413-458 National Bureau of Economic Research, Inc.
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    8. Aaberge, Rolf & Flood, Lennart, 2008. "Evaluation of an In-Work Tax Credit Reform in Sweden: Effects on Labor Supply and Welfare Participation of Single Mothers," IZA Discussion Papers 3736, Institute for the Study of Labor (IZA).
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    Cited by:

    1. repec:spr:jlabrs:v:50:y:2017:i:1:d:10.1007_s12651-017-0223-7 is not listed on IDEAS
    2. Flood Lennart & Islam Nizamul, 2016. "The rise of working pensioners: the Swedish case," Nordic Tax Journal, De Gruyter Open, vol. 2016(1), pages 41-66, May.
    3. Per Johansson & Lisa Laun & Mårten Palme, 2016. "Health, Work Capacity, and Retirement in Sweden," NBER Chapters,in: Social Security Programs and Retirement Around the World: The Capacity to Work at Older Ages, pages 301-327 National Bureau of Economic Research, Inc.
    4. Stéphanie Jamet & Thomas Chalaux & Vincent Koen, 2013. "Labour Market and Social Policies to Foster More Inclusive Growth in Sweden," OECD Economics Department Working Papers 1023, OECD Publishing.
    5. repec:spr:jopoec:v:31:y:2018:i:1:d:10.1007_s00148-017-0664-x is not listed on IDEAS
    6. Hagen, Johannes, 2016. "What are the Health effects of postponing retirement? An instrumental variable approach," Working Paper Series 2016:11, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    7. Maciej Lis & Agnieszka Kamińska & Aart-Jan Riekhoff & Izabela Styczynska, 2013. "The Impact of Institutional and Socio-Ecological Drivers on Activity at Older Ages," CASE Network Reports 0115, CASE-Center for Social and Economic Research.

    More about this item

    Keywords

    Labor supply; Retirement; Earned income tax credit; Payroll taxes;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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