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Publication

Labor Market Effects of an Increase in the Early Eligibility Age in a Flexible Pension System

Forfattere: Hernæs, Øystein, Alireza Khoshghadam, Stefanie König, Johannes Hagen
Publisert: 2025
Sammendrag: We study a reform that raised the earliest eligibility age for public pensions from 61 to 62. Using rich Swedish administrative data and a difference-in-differences design that compares adjacent age groups differentially affected by the new threshold, we assess the reform’s effects on pension claiming, labor supply, social insurance benefit receipt, and disposable income. Prior to the reform, around 10% of individuals claimed their public pension at age 61. The reform mechanically reduced this share to zero, but also induced delayed claiming beyond the new threshold, including postponed occupational and private pension claims. Employment increased by up to 1.3 percentage points, and sickness and unemployment benefit receipt rose by 0.6–0.9 and 0.1–0.2 percentage points, respectively. These responses were concentrated among low-income individuals who were already working. For this group, increased work offset the delayed pension access and left disposable income largely unchanged. In contrast, non-working low-income individuals and the self-employed experienced a substantial short-term decline in disposable income, ranging from 7 to 10%. Our findings point to liquidity constraints and behavioral responses as key mechanisms in eligibility age reforms within a flexible, actuarially neutral pension system where work and pension claiming are decoupled. Overall, the reform had a modest yet positive net fiscal impact.
Prosjekt: 1777 Pensjonssystemet og et langt arbeidsliv
Referanse: Hernæs, Øystein, Alireza Khoshghadam, Stefanie König, Johannes Hagen, 2025, «Labor Market Effects of an Increase in the Early Eligibility Age in a Flexible Pension System», Andre skriftserier, Netspar AP 2025-18
JEL Codes: H55, H75, J22, J26
Keywords: Retirement age, Claiming age, Pension reform, Labor supply, Distributional effect
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