Pension Reform and Labor Supply: Flexibility vs. Prescription

Erik Hernaes (), Simen Markussen, John Piggott and Knut Røed ()

No 8812, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We exploit a comprehensive restructuring of the early retirement system in Norway in 2011 to examine labor supply responses to alternative pension reform strategies relying on improved work incentives (flexibility) or increased access ages (prescription), respectively. We find that increasing the returns to work is a powerful policy tool: The removal of the earnings test at age 63 led to an immediate increase in average annual labor earnings among the affected mature workers by around $14,700 (NOK 90,000). The implied uncompensated labor earnings elasticity (the percentage change in average gross earnings relative to the percentage change in average work-incentives) is around 0.25.

Keywords: early retirement; labor supply; pension reform; program evaluation (search for similar items in EconPapers)
JEL-codes: H55 J22 J26 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-01
New Economics Papers: this item is included in nep-age, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - revised version published as 'Pension Reform and Labor Supply' in: Journal of Public Economics, 2016, 142, 39–55

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