IDEAS home Printed from https://ideas.repec.org/a/bla/labour/v17y2003i2p203-228.html
   My bibliography  Save this article

Early Retirement and Economic Incentives: Evidence from a Quasi‐natural Experiment

Author

Listed:
  • Knut Røed
  • Fredrik Haugen

Abstract

. During the 1990s, a new subsidized early retirement option was assigned quasi‐randomly to two‐thirds of Norwegian elderly workers. We use this ‘natural experiment’ to evaluate how economic incentives affect retirement behaviour. The new retirement option reduced employment substantially, and this effect escalated over time. It did not substitute for disability pension or long‐term unemployment, and approximately two out of three retirees would have stayed employed without it. Subsidized retirement was primarily voluntary, but there is also some evidence that firms took advantage of the retirement programme to ‘push out’ excess workers.

Suggested Citation

  • 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.
    • Handle: RePEc:bla:labour:v:17:y:2003:i:2:p:203-228
    DOI: 10.1111/1467-9914.00227
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-9914.00227
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-9914.00227?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Wise, David A., 1985. "Pensions, Labor, and Individual Choice," National Bureau of Economic Research Books, University of Chicago Press, number 9780226902937, June.
    2. Courtney Coile & Jonathan Gruber, 2001. "Social Security Incentives for Retirement," NBER Chapters, in: Themes in the Economics of Aging, pages 311-354, National Bureau of Economic Research, Inc.
    3. repec:hoo:wpaper:e-88-28 is not listed on IDEAS
    4. 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.
    5. Wiji Narendranathan & Mark B. Stewart, 1993. "Modelling the Probability of Leaving Unemployment: Competing Risks Models with Flexible Base‐Line Hazards," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 42(1), pages 63-83, March.
    6. Jerry A. Hausman & David A. Wise, 1985. "Social Security, Health Status, and Retirement," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 159-192, National Bureau of Economic Research, Inc.
    7. Gruber, Jonathan & Wise, David, 1998. "Social Security and Retirement: An International Comparison," American Economic Review, American Economic Association, vol. 88(2), pages 158-163, May.
    8. Krueger, Alan B & Pischke, Jorn-Steffen, 1992. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 412-437, October.
    9. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
    10. Glenn T. Sueyoshi, 1989. "Social Security and the Determinants of Full and Partial Retirement: A Competing Risks Analysis," NBER Working Papers 3113, National Bureau of Economic Research, Inc.
    11. 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 724-756, October.
    12. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    13. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    14. Baker, Michael & Melino, Angelo, 2000. "Duration dependence and nonparametric heterogeneity: A Monte Carlo study," Journal of Econometrics, Elsevier, vol. 96(2), pages 357-393, June.
    15. David A. Wise, 1985. "Pensions, Labor, and Individual Choice," NBER Books, National Bureau of Economic Research, Inc, number wise85-1, February.
    16. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Iskhakov, Fedor, 2008. "Pension Reforms in Norway: Evidence from a Structural Dynamic Model," Memorandum 14/2008, Oslo University, Department of Economics.
    2. Weemes Grøtting, Maja & Lillebø, Otto, 2017. "Health Effects of Retirement: Evidence from Survey and Register Data," Working Papers in Economics 10/18, University of Bergen, Department of Economics, revised 19 Nov 2018.
    3. Vestad, Ola Lotherington, 2013. "Labour supply effects of early retirement provision," Labour Economics, Elsevier, vol. 25(C), pages 98-109.
    4. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics.
    5. Maja Weemes Grøtting & Otto Sevaldson Lillebø, 2020. "Health effects of retirement: evidence from survey and register data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(2), pages 671-704, April.
    6. Hernaes, Erik & Markussen, Simen & Piggott, John & Vestad, Ola L., 2013. "Does retirement age impact mortality?," Journal of Health Economics, Elsevier, vol. 32(3), pages 586-598.
    7. Euwals, Rob & Trevisan, Elisabetta, 2014. "Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners," IZA Discussion Papers 8466, Institute of Labor Economics (IZA).
    8. Aakvik, Arild & Dahl, Svenn-Åge & Vaage, Kjell, 2005. "Late careers and career exits in Norway," Working Papers in Economics 14/05, University of Bergen, Department of Economics.
    9. Pål Schøne, 2009. "New technologies, new work practices and the age structure of the workers," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(3), pages 803-826, July.
    10. Holen, Dag S., 2007. "It Ain't Necessariy So," Memorandum 19/2008, Oslo University, Department of Economics.
    11. Daniel Hallberg & Matias Eklöf, 2010. "Do buy‐outs of older workers matter?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 31(3), pages 337-359, June.
    12. Ranzani, Marco, 2006. "Social Security and Labour Supply: the Italian 1992 Reform as a Natural Experiment," MPRA Paper 16569, University Library of Munich, Germany, revised Dec 2008.
    13. Johnsen, Julian V. & Vaage, Kjell, 2015. "Spouses’ retirement and the take-up of disability pension," Working Papers in Economics 03/15, University of Bergen, Department of Economics.
    14. Justina A.V. Fischer & Alfonso Sousa-Poza, 2006. "The Institutional Determinants of Early Retirement in Europe," University of St. Gallen Department of Economics working paper series 2006 2006-08, Department of Economics, University of St. Gallen.
    15. Rob Euwals & Elisabetta Trevisan, 2011. "Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners," CPB Discussion Paper 195.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Grøtting, Maja Weemes & Lillebø, Otto Sevaldson, 2017. "Health effects of retirement. Evidence from Norwegian survey and register data," Working Papers in Economics 02/17, University of Bergen, Department of Economics, revised 19 Nov 2018.
    17. Nordberg, Morten, 2007. "The Total Tax on Labour Income," Memorandum 05/2007, Oslo University, Department of Economics.
    18. Hinrichs, Karl, 2004. "Active Citizens and Retirement Planning: Enlarging Freedom of Choice in the Course of Pension Reforms in Nordic Countries and Germany," Working papers of the ZeS 11/2004, University of Bremen, Centre for Social Policy Research (ZeS).
    19. Rob Euwals & Elisabetta Trevisan, 2011. "Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners," CPB Discussion Paper 195, CPB Netherlands Bureau for Economic Policy Analysis.
    20. Dennis Fredriksen & Nils Martin Stølen, 2011. "Norwegian pension reform Defined benefit versus defined contribution," Discussion Papers 669, Statistics Norway, Research Department.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Courtney Coile & Jonathan Gruber, 2004. "The Effect of Social Security on Retirement in the United States," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 691-730, National Bureau of Economic Research, Inc.
    2. Karakaya, Güngör, 2008. "Early cessation of activity in the labour market: impact of supply and demand factors," MPRA Paper 13390, University Library of Munich, Germany.
    3. Coile Courtney, 2004. "Retirement Incentives and Couples' Retirement Decisions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-30, July.
    4. Liebman, Jeffrey B. & Luttmer, Erzo F.P. & Seif, David G., 2009. "Labor supply responses to marginal Social Security benefits: Evidence from discontinuities," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1208-1223, December.
    5. Hanel, Barbara, 2010. "Financial incentives to postpone retirement and further effects on employment -- Evidence from a natural experiment," Labour Economics, Elsevier, vol. 17(3), pages 474-486, June.
    6. Courtney Coile & Jonathan Gruber, 2001. "Social Security Incentives for Retirement," NBER Chapters, in: Themes in the Economics of Aging, pages 311-354, National Bureau of Economic Research, Inc.
    7. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    8. Arnds, Pascal & Bonin, Holger, 2002. "Frühverrentung in Deutschland: Ökonomische Anreize und institutionelle Strukturen," IZA Discussion Papers 666, Institute of Labor Economics (IZA).
    9. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    10. Piekkola, Hannu & Deschryvere, Matthias, 2004. "Retirement Decisions and Option Values: Their Application Regarding Finland," Discussion Papers 951, The Research Institute of the Finnish Economy.
    11. Ranzani, Marco, 2006. "Social Security and Labour Supply: the Italian 1992 Reform as a Natural Experiment," MPRA Paper 16569, University Library of Munich, Germany, revised Dec 2008.
    12. Michael Baker & Jonathan Gruber & Kevin Milligan, 2003. "The retirement incentive effects of Canada's Income Security programs," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 261-290, May.
    13. Hakola, Tuulia, 2002. "Alternative Approaches to Model Withdrawals from the Labour Market – A Literature Review," Working Paper Series 2003:4, Uppsala University, Department of Economics.
    14. repec:lic:licosd:22108 is not listed on IDEAS
    15. Friedberg, Leora, 1999. "The effect of old age assistance on retirement," Journal of Public Economics, Elsevier, vol. 71(2), pages 213-232, February.
    16. Samwick, Andrew A., 1998. "New evidence on pensions, social security, and the timing of retirement," Journal of Public Economics, Elsevier, vol. 70(2), pages 207-236, November.
    17. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    18. David E. Bloom & David Canning & Günther Fink & Jocelyn E. Finlay, 2008. "Demographic Change, Institutional Settings, and Labor Supply," PGDA Working Papers 4208, Program on the Global Demography of Aging.
    19. Courtney Coile & Jonathan Gruber, 2007. "Fiscal Effects of Social Security Reform in the United States," NBER Chapters, in: Social Security Programs and Retirement around the World: Fiscal Implications of Reform, pages 503-532, National Bureau of Economic Research, Inc.
    20. Bütler, Monika & Huguenin, Olivia & Teppa, Federica, 2004. "What Triggers Early Retirement? Results from Swiss Pension Funds," CEPR Discussion Papers 4394, C.E.P.R. Discussion Papers.
    21. Barbara Hanel, 2010. "Disability Pensions and Labor Supply," Working Papers 086, Bavarian Graduate Program in Economics (BGPE).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:labour:v:17:y:2003:i:2:p:203-228. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/csrotit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.