Excess Early Retirement? Evidence from the Norwegian 2011 Pension Reform
in: Lectures "WIFO-Extern"
Lectures "WIFO-Extern", Österreichisches Institut für Wirtschaftsforschung, Wien, 17.09.2015
This paper studies how a major reform of the Norwegian pension system affected the labour supply and pension claiming behaviour
of older workers. The 2011 reform brought three major changes: 1. Individuals may start claiming pensions anytime between
ages 62 and 75. 2. There are actuarially neutral pension adjustments for early or late claiming. 3. Pension benefits are no
longer earnings tested. This policy-mix implies that the decision of claiming pensions becomes fully disentangled from the
decision of exiting the labour force. Prior to the reform, only workers covered by a contractual pension scheme (AFP workers)
had access to a pension between ages 62 and 67, while workers not eligible for a contractual pension (non-AFP workers) could
claim pension benefits only from age 67. Moreover, AFP pension benefits between ages 62 and 67 were earnings-tested and not
adjusted for postponed withdrawal. Using a difference-in-differences framework we find that 1. removing the earnings test
and introducing actuarial adjustments has large positive effects on employment rates of AFP workers, but a large spike in
retirement at age 62 remains; 2. AFP and non-AFP workers are substantially more likely to claim their pension already at age
62; 3. labour supply responses of non-AFP workers occur only along the intensive margin, while their employment rates remain
unchanged.
Keywords:net returns to work, Pension reform, early retirement age, labour supply
Research group:Labour Economics, Income and Social Security