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Health status, life expectancy and early claiming of pension

Author

Listed:
  • Arild Aakvik

    (University of Bergen)

  • Tor Helge Holmås

    (NORCE Norwegian Research Centre)

  • Egil Kjerstad

    (NORCE Norwegian Research Centre)

Abstract

Prior to 2011, individual life expectancy played no role in the Norwegian old-age pension system. However, after the 2011 reform, life expectancy became a central factor for early pension take-up. Asymmetric information is crucial in most insurance markets, including the new pension system, where employees can flexible claim a public pension from the age of 62. Individuals who expect to live longer than the average for their birth cohort can maximize their pension wealth by deferring pension claiming, while those with a shorter life expectancy should draw their pension as early as possible. This raises concerns that adverse selection may pose a risk to the sustainability of the new pension system. To investigate this issue, we use chronic disease as a proxy for life expectancy and examine its relationship with employment and pension decisions. Our findings show that individuals with a chronic health condition are more likely to draw a pension and continue working when they reach 62 years of age compared to those without a chronic health condition. This suggests potential adverse selection issues in the pension system, although our results suggest small effects after adjusting for unobservables.

Suggested Citation

  • Arild Aakvik & Tor Helge Holmås & Egil Kjerstad, 2024. "Health status, life expectancy and early claiming of pension," SN Business & Economics, Springer, vol. 4(4), pages 1-20, April.
    • Handle: RePEc:spr:snbeco:v:4:y:2024:i:4:d:10.1007_s43546-024-00640-7
    DOI: 10.1007/s43546-024-00640-7
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    More about this item

    Keywords

    Life expectancy; Chronic health; Pension; Early claiming; Adverse selection;
    All these keywords.

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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