Scandinavian Working Papers in Economics

Arbetsrapport,
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 ()
Additional contact information
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.

Keywords: retirement behaviour; social security reforms

JEL-codes: I00

50 pages, March 20, 2002

Price: 25 SEK

Note: ISBN 91-89655-27-3

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20051201133334fil18DfL26rw6MebmHyPUR8.pdf PDF-file

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