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Towards an actuarially fair pension system in Norway


  • Ugo Colombino


  • Erik Hernæs
  • Marilena Locatelli
  • Steinar Strøm


In order to estimate labour supply responses among older people we have employed a very simple model of retirement decisions that can be estimated on a single cross-section sample, and still be given a structural interpretation in terms of inter-temporal decisions. The model is estimated on Norwegian register data from 1996, which covers all Norwegians aged 55-68 in 1996. The empirical model is employed to assess the impact on retirement of moving the Norwegian pension system towards actuarial fairness. Future annual pension benefits are increased if retirement is postponed say, for one year. In one of the simulations future annual benefits are increased by NOK 8,000 (as of April 2009 1 Euro~ NOK 8.7), which is around 5 per cent of the average pension benefit in 1996 and corresponds approximately to the adjustment in the new pension system which comes into effect 1. January 2011. The number of men and women choosing retirement is reduced by around 5 per cent, given that there is no consumption smoothing. When perfect consumption smoothing is assumed the reduction is much larger; 18 per cent in the case of men and 14 per cent in the case of women. These reductions are really sizeable and indicate that pension reforms, combined with removing constraints in the credit market, may be of great importance in giving the individuals incentive to prolong their working life.

Suggested Citation

  • Ugo Colombino & Erik Hernæs & Marilena Locatelli & Steinar Strøm, 2009. "Towards an actuarially fair pension system in Norway," CHILD Working Papers wp14_09, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  • Handle: RePEc:wpc:wplist:wp14_09

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    References listed on IDEAS

    1. Burtless, Gary & Moffitt, Robert A, 1985. "The Joint Choice of Retirement Age and Postretirement Hours of Work," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 209-236, April.
    2. Erik Hernæs & Zhiyang Jia & Steinar Strøm, 2007. "Retirement in Non-Cooperative and Cooperative Families," Chapters,in: Ageing and the Labor Market in Japan, chapter 7 Edward Elgar Publishing.
    3. Steinar StrØm & John K. Dagsvik, 2006. "Sectoral labour supply, choice restrictions and functional form," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(6), pages 803-826.
    4. Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 403-422, July-Aug..
    5. Ugo Colombino, 2003. "A Simple Intertemporal Model of Retirement Estimated On Italian Cross-Section Data," LABOUR, CEIS, vol. 17(SpecialIs), pages 115-137, August.
    6. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-659, December.
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    More about this item


    Retirement; inter-temporal interpretation; estimates and policy simulations; Norway;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • 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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