Work Less but Stay Longer: Mature Worker Response to a Flexibility Reform

tirsdag, 01 desember 2020

Working paper by Erik Hernaes, Zhiyang Jia, John Piggott and Trond Christian Vigtel.

Reducing the eligibility age for pension benefits is considered by many as a policy that will discourage labor supply by mature workers. This paper analyzes a recent Norwegian pension reform which effectively lowered the eligibility age of retirement from 67 to 62 for a group of workers.

For the individuals we study, the expected present value of benefits was held constant by introducing flexible claiming and actuarially adjusting the periodic pension payment. This neutralized the income effect of decreasing the access age, while the absence of any earnings test ensured constant present value of the pension, independent of the age when it is claimed. This provides us with a unique opportunity to study the isolated impact of increased flexibility.