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Pathways to retirement and the role of financial incentives in Sweden

Author

Listed:
  • Johansson, Per

    (IFAU - Institute for Evaluation of Labour Market and Education Policy)

  • Laun, Lisa

    (IFAU - Institute for Evaluation of Labour Market and Education Policy)

  • Palme, Mårten

    (Department of Economics, Stockholm University)

Abstract

We study how economic incentives affect labor force exit through different income security programs, old-age pensions as well as income taxes in Sweden. We use the option value for staying in the labor force as a measure of economic incentives and estimate an econometric model for the choice of leaving the labor market. Besides old-age pension, we focus on the Disability Insurance (DI), which is the most important exit path before age 65. By simulating the effect of different probabilities to be admitted DI we show how changes in the stringency of DI admittance affects labor supply among older workers through economic incentives.

Suggested Citation

  • Johansson, Per & Laun, Lisa & Palme, Mårten, 2014. "Pathways to retirement and the role of financial incentives in Sweden," Working Paper Series 2014:20, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2014_020
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    References listed on IDEAS

    as
    1. Johansson Per & Laun Lisa & Laun Tobias, 2014. "Screening Stringency in the Disability Insurance Program," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(3), pages 873-891, July.
    2. Mårten Palme & Ingemar Svensson, 2004. "Income Security Programs and Retirement in Sweden," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 579-642, National Bureau of Economic Research, Inc.
    3. David A. Wise, 2012. "Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms," NBER Books, National Bureau of Economic Research, Inc, number wise11-1.
    4. Laun, Tobias & Wallenius, Johanna, 2015. "A life cycle model of health and retirement: The case of Swedish pension reform," Journal of Public Economics, Elsevier, vol. 127(C), pages 127-136.
    5. 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.
    6. Hagen, Johannes, 2013. "A History of the Swedish Pension System," Working Paper Series, Center for Fiscal Studies 2013:7, Uppsala University, Department of Economics.
    7. Marten Palme & lngemar Svensson, 1999. "Social Security, Occupational Pensions, and Retirement in Sweden," NBER Chapters, in: Social Security and Retirement around the World, pages 355-402, National Bureau of Economic Research, Inc.
    8. Karlström, Anders & Palme, Mårten & Svensson, Ingemar, 2008. "The employment effect of stricter rules for eligibility for DI: Evidence from a natural experiment in Sweden," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2071-2082, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Lisa Laun & Mårten Palme, 2018. "The Recent Rise of Labor Force Participation of Older Workers in Sweden," NBER Chapters, in: Social Security Programs and Retirement around the World: Working Longer, pages 231-265, National Bureau of Economic Research, Inc.
    2. Cattan, Sarah & Kamhöfer, Daniel A. & Karlsson, Martin & Nilsson, Therese, 2017. "The Short- and Long-Term Effects of Student Absence: Evidence from Sweden," IZA Discussion Papers 10995, Institute of Labor Economics (IZA).
    3. Ollonqvist, Joonas & Kotakorpi, Kaisa & Laaksonen, Mikko & Martikainen, Pekka & Pirttilä, Jukka & Tarkiainen, Lasse, 2021. "Incentives, Health, and Retirement: Evidence from a Finnish Pension Reform," Working Papers 145, VATT Institute for Economic Research.
    4. Sarah Cattan & Daniel A Kamhöfer & Martin Karlsson & Therese Nilsson, 2023. "The Long-Term Effects of Student Absence: Evidence from Sweden," The Economic Journal, Royal Economic Society, vol. 133(650), pages 888-903.
    5. Mona Larsen & Peder J. Pedersen, 2017. "Labour force activity after 65: what explain recent trends in Denmark, Germany and Sweden? [Arbeitsmarktbeteiligung von über 65-Jährigen: Ursachen für die jüngsten Entwicklungstrends in Dänemark, D," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 50(1), pages 15-27, August.
    6. Cetin, Sefane & Jousten, Alain, 2022. "Retirement Decision of Belgian Couples and the Impact of the Social Security System," LIDAM Discussion Papers CORE 2022024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Forslund, Anders, 2019. "Employment outcomes and policies in Sweden during recent decades," Working Paper Series 2019:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    8. Laun, Lisa, 2017. "The effect of age-targeted tax credits on labor force participation of older workers," Journal of Public Economics, Elsevier, vol. 152(C), pages 102-118.
    9. Ulrike Famira-Mühlberger & Ulrike Huemer & Christine Mayrhuber, 2015. "Der Einfluss der sozialen Sicherungssysteme auf die Beschäftigungsquote Älterer in traditionellen Wohlfahrtsstaaten," WIFO Working Papers 499, WIFO.

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    More about this item

    Keywords

    Disability Insurance; option value; labor market exit; labor supply;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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