The Effect of Relabeling and Incentives on Retirement: Evidence from the Finnish Pension Reform in 2005

Ohto Kanninen, Terhi Ravaska, Jon Gruber, Satu Nivalainen and Roope Uusitalo

No 328, Working Papers from Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE

Abstract: We exploit a reform in the Finnish public pension system in 2005 to study the effect of financial incentives (wealth effect and substitution effect) and relabeling of pensions on retirement decisions. These effects are distinguishable in the reform due to a heterogeneous, although correlated, impact of the reform on individuals. Relabeling in the reform means renaming the pension type from early retirement to full retirement based on age. Incentives were affected as a function of age and accrual-to-earnings ratio. Wefind that all three effects played a role. We show that the relabeling alone explains mostof the immediate behavioral impact of the reform.

Keywords: Retirement; substitution effect; wealth effect; relabeling; pension reform (search for similar items in EconPapers)
JEL-codes: D9 H55 H75 J14 J26 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2019-06-06
New Economics Papers: this item is included in nep-age and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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