Scandinavian Working Papers in Economics
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Institutet för Framtidsstudier - Institute for Futures Studies Arbetsrapport, Institutet för Framtidsstudier - Institute for Futures Studies

No 2002:8:
The Timing of Retirement and Social Security Reforms: Measuring Individual Welfare Changes

Anders Karlström (), Mårten Palme () and Ingemar Svensson ()

Abstract: We develop a compensating variation (CV) measure of individual welfare change from reforms of social security schemes. Within a random utility framework for modeling the individual retirement decision (e.g. the "option value" or dynamic programing models), this measure takes the individual timing of retirement as a response to the reform into account. In the empirical part of the paper an option value model is estimated using Swedish panel data. This model is then used to simulate the effect of a hypothetical reform of Sweden's income security system where eligibility to pensions are delayed by three years. The individual welfare measure is used to assess the overall welfare change as well as the distributional effects.

Keywords: retirement behaviour; social security reforms; (follow links to similar papers)

JEL-Codes: I00; (follow links to similar papers)

50 pages, March 20, 2002

ISBN 91-89655-27-3

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