Nationaløkonomisk tidsskrift,
Nationaløkonomisk Forening

Abstract: To our knowledge, this paper is one of the first to evaluate the effect of the Senior Prize; a tax‐free lump‐sum introduced in Denmark in 2019 to encourage seniors to work past their statutory retirement age. We use administrative data and apply a Regression Discontinuity design and a Difference‐in‐Difference approach to analyze the labor supply responses of seniors from the introduction of the prize. Our findings show that the Senior Prize does not have an immediate overall effect on labor supply, but suggest a potential medium‐term effect and that knowledge of the prize is important for responsiveness. The total effect, however, is minimal compared to the costs of the policy amounting to almost DKK 790 million by December 2022. This highlights the need for evidence‐based policy recommendations to reduce the deadweight loss associated with the prize.

Keywords: Senior Labor Supply; Retirement Policies; Financial Incentives; Social Security; Public Pensions

JEL-codes: G18; H55; J22; J26

Language: English

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