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Labour supply effects of early retirement provision

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    Abstract

    The main objective of this paper is to estimate labour supply effects of an early retirement programme in Norway. Detailed administrative data are employed in order to characterize full paths towards retirement and account for substitution from other exit routes, such as unemployment and disability insurance. By exploiting a reduction in the lower age limit for early retirement as a source of exogenous variation in individual eligibility I obtain robust difference-in-differences and triple differences estimates indicating that more than two out of three pensioners would still be working at the age of 63 had the age limit been 64 rather than 62. Hence, although successful in creating a more dignified exit route for early leavers, the programme also generated substantial costs in terms of inducing others to retire earlier.

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    Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 717.

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    Date of creation: Nov 2012
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    Handle: RePEc:ssb:dispap:717
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    Keywords: Induced retirement; Pension reform; Matched employer-employee register data; Difference-in-differences.;

    Find related papers by JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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    1. Hernæs, Erik & Piggott, John & Zhang, Tao & Strøm, Steinar, 2011. "Occupational pensions, tenure, and taxes," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(03), pages 435-456, July.
    2. Jonathan Gruber & David A. Wise, 2010. "Social Security Programs and Retirement around the World: The Relationship to Youth Employment," NBER Books, National Bureau of Economic Research, Inc, number grub08-1, May.
    3. Hernaes, Erik & Sollie, Marte & Strom, Steinar, 2000. " Early Retirement and Economic Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 481-502, June.
    4. Luc Behaghel & David M. Blau, 2010. "Framing Social Security Reform: Behavioral Responses to Changes in the Full Retirement Age," Working Papers wp243, University of Michigan, Michigan Retirement Research Center.
    5. Jonathan Gruber & David A. Wise, 1999. "Introduction to "Social Security and Retirement around the World"," NBER Chapters, in: Social Security and Retirement around the World, pages 1-35 National Bureau of Economic Research, Inc.
    6. Giovanni Mastrobuoni, 2006. "Labor Supply Effects of the Recent Social Security Benefit Cuts: Empirical Estimates Using Cohort Discontinuities," Working Papers 66, Princeton University, Department of Economics, Center for Economic Policy Studies..
    7. Karlström, Anders & Palme, Mårten & Svensson, Ingemar, 2008. "The Employment Effect of Stricter Rules for Eligibility for DI: Evidence from a Natural Experiment in Sweden," Research Papers in Economics 2008:3, Stockholm University, Department of Economics.
    8. Inderbitzin, Lukas & Staubli, Stefan & Zweimüller, Josef, 2013. "Extended Unemployment Benefits and Early Retirement: Program Complementarity and Program Substitution," IZA Discussion Papers 7330, Institute for the Study of Labor (IZA).
    9. Bratsberg, Bernt & Fevang, Elisabeth & Røed, Knut, 2010. "Disability in the Welfare State: An Unemployment Problem in Disguise?," IZA Discussion Papers 4897, Institute for the Study of Labor (IZA).
    10. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, May.
    11. Jerry Hausman, 2001. "Mismeasured Variables in Econometric Analysis: Problems from the Right and Problems from the Left," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 57-67, Fall.
    12. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1, May.
    13. Knut Røed & Fredrik Haugen, 2003. "Early Retirement and Economic Incentives: Evidence from a Quasi-natural Experiment," LABOUR, CEIS, vol. 17(2), pages 203-228, 06.
    14. Espen Bratberg & Tor Helge Holmås & Øystein Thøgersen, 2004. "Assessing the effects of an early retirement program," Journal of Population Economics, Springer, vol. 17(3), pages 387-408, 08.
    15. Baker, Michael & Benjamin, Dwayne, 1999. "Early Retirement Provisions and the Labor Force Behavior of Older Men: Evidence from Canada," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 724-56, October.
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    Cited by:

    1. Hernaes, Erik & Markussen, Simen & Piggott, John & Vestad, Ola, 2012. "Does Retirement Age Impact Mortality?," Memorandum 19/2012, Oslo University, Department of Economics.
    2. Vestad, Ola Lotherington, 2013. "Labour supply effects of early retirement provision," Labour Economics, Elsevier, vol. 25(C), pages 98-109.

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