Early Retirement Provision for Elderly Displaced Workers

Kruse, Herman and Myhre, Andreas (2021): Early Retirement Provision for Elderly Displaced Workers.

Abstract

This paper studies the economic effects on re-employment and program substitution behavior among elderly displaced workers who exogenously lose eligibility for their early retirement option. We use detailed Norwegian matched employer-employee data containing information on bankruptcy dates and individual-level wealth, income, pensions and social security benefits. Our empirical strategy employs a regression discontinuity design, as job displacement before a certain age cut-off results in losing eligibility for early retirement benefits between ages 62–67 years in Norway. We find that reemployment rates are indistinguishable between workers who just retain eligibility for early retirement benefits and those who just do not. Meanwhile, those who lose eligibility offset 69% of their lost benefits through take-up of other social security benefits, where 51% comes from disability insurance and 13% from unemployment insurance. Our findings are particularly policy relevant as tightening of age-limits for old-age pensions is on the agenda in several OECD countries, while current economic hardship throughout the region may lead to increased job displacement for elderly workers.

• Item Type: MPRA Paper
• Language: English
• Keywords: early retirement, job displacement, labor supply, benefit substitution, social security
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I38 - Government Policy ; Provision and Effects of Welfare Programs; J - Labor and Demographic Economics > J1 - Demographic Economics > J14 - Economics of the Elderly ; Economics of the Handicapped ; Non-Labor Market Discrimination; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J26 - Retirement ; Retirement Policies; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J65 - Unemployment Insurance ; Severance Pay ; Plant Closings

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