(), Mårten Palme
() and Ingemar Svensson
Anders Karlström: Royal Institute of Technology, Postal: SE-100 44 Stockholm, Sweden
Mårten Palme: Stockholm School of Economics, Postal: Box 6501, SE-113 83 Stockholm, Sweden
Ingemar Svensson: National Social Insurance Board, Postal: SE-103 51 Stockholm, Sweden
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.
50 pages, March 20, 2002
Price: 25 SEK
Note: ISBN 91-89655-27-3
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