Department of Economics

Research seminar with Christian Brinch: Excess early retirement? Evidence from the Norwegian 2011 Pension Reform

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Welcome to our research seminar with Associate professor Christian Brinch from BI.

Title of the seminar: Excess early retirement? Evidence from the Norwegian 2011 Pension Reform

Abstract: This paper studies how a major reform of the Norwegian pension system affected the labor supply and pension claiming behavior of older workers. The 2011 reform brought three major changes: (i) individuals may start claiming pensions anytime between ages 62 and 75; (ii) there are actuarially neutral pension adjustments for early/late claiming; and (iii) 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 labor 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 (i) 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; (ii) AFP and nonAFP workers are substantially more likely to claim their pension already at age 62; (iii) labor supply responses of nonAFP workers occur only along the intensive margin, while their employment rates remain unchanged.