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Labour Supply Effects of an Early Retirement Programme

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  • Christian Brinch
  • Erik Hernæs
  • Steinar Strøm

Abstract

In 1988, an early retirement program (AFP) was introduced in Norway for the 66-years-old. Since then, AFP has gradually been extended and by now it covers workers aged 62-66. In this paper we employ a multinominal logit model to study the transition between states in the labour market. The model is estimated on a large panel data set covering the period 1988-2 to 1999-4. The estimated model tracks the development quite well, as also outside sample predictions do. The model is used to assess the future labour market impact of abolishing AFP. We find that by abolishing AFP may increase the labour force participation among older men (55-67) in 2005 from 72 percent in the baseline projection to 83 percent. For females the corresponding increase is from 62 to 67 percent.

Suggested Citation

  • Christian Brinch & Erik Hernæs & Steinar Strøm, 2001. "Labour Supply Effects of an Early Retirement Programme," CESifo Working Paper Series 463, CESifo.
    • Handle: RePEc:ces:ceswps:_463
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    References listed on IDEAS

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    1. 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.
    2. Erik Hernæs & Steinar Strøm, 2000. "Family labour supply when the husband is eligible for early retirement," ICER Working Papers 04-2000, ICER - International Centre for Economic Research.
    3. Lumsdaine, Robin L. & Mitchell, Olivia S., 1999. "New developments in the economic analysis of retirement," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 49, pages 3261-3307, Elsevier.
    4. Erik Hernoes & Marte Sollie & Steinar Strøm, 2000. "Early Retirement and Economic Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 481-502, September.
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    Citations

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    Cited by:

    1. David Kocourek & Filip Pertold, 2011. "The Impact of Early Retirement Incentives on Labor Market Participation: Evidence from a Parametric Change in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(5), pages 467-483, November.
    2. Erling Holmøy & Kyrre Stensnes, 2008. "Will the Norwegian pension reform reach its goals? An integrated micro-macro assessment," Discussion Papers 557, Statistics Norway, Research Department.
    3. Robert Fenge & Silke Uebelmesser & Martin Werding, 2002. "Second-best Properties of Implicit Social Security Taxes: Theory and Empirical Evidence," CESifo Working Paper Series 743, CESifo.
    4. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    5. Gunes Asik, 2018. "Impact of early retirement incentives on labor supply of young men and women : evidence from Turkey," Working Papers 20180002, UMR Développement et Sociétés, Université Paris 1 Panthéon-Sorbonne, Institut de Recherche pour le Développement.
    6. Iskhakov, Fedor, 2003. "Quasi-dynamic forward-looking model for joint household retirement decision under AFP scheme," Memorandum 28/2003, Oslo University, Department of Economics.
    7. Dennis Fredriksen & Erling Holmøy & Birger Strøm & Nils Martin Stølen, 2015. "Fiscal effects of the Norwegian pension reform. A micro-macro assessment," Discussion Papers 821, Statistics Norway, Research Department.
    8. Nordberg, Morten, 2007. "The Total Tax on Labour Income," Memorandum 05/2007, Oslo University, Department of Economics.
    9. Robert Fenge & Silke Uebelmesser & Martin Werding, 2006. "On the Optimal Timing of Implicit Social Security Taxes Over the Life Cycle," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(1), pages 68-107, March.

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    More about this item

    Keywords

    Early retirement; large panel data sets; econometric models;
    All these keywords.

    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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