Early Retirement and Economic Incentives

Authors:

Hernæs, Erik, Marte Sollie and Steinar Strøm

Year:

2000

Reference:

Vol 102, no. 3

Summary

In Norway early retirement programs have gradually reduced the retirement age from 67 to 62 for a majority of the labor force. Based on micro data for 1990 and 1992, we estimate a competing risk models with three states: full retirement, partial retirement/part-time work, and full-time work, and we use the estimated model in simulations to study how financial incentives can be strengthened to extend working life. Financial incentives, educational background and industry affiliation are found to influence retirement behavior. For low and medium incomes, the tax system shifts the incentives heavily towards early retirement, in particular partial retirement combined with part-time work.

JEL:

D10, J22, J26

Keywords:

Early retirement, multinomial logit model, taxes

Project:

Oppdragsgiver: Norges forskningsråd
Oppdragsgivers prosjektnr.:
Frisch prosjekt: 1202 - Pension schemes, work activity and retirement behaviour