Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 33/2001: Labour Supply Effects of an Early Retirement Programme

Christian Brinch (), Erik Hernæs () and Steinar Strøm ()
Additional contact information
Christian Brinch: Ragnar Frisch Centre for Economic Research, Postal: Ragnar Frisch Centre for Economic Research, Gaustadalléen 21, , 0349 Oslo, , Norway
Erik Hernæs: Ragnar Frisch Centre for Economic Research, Postal: Ragnar Frisch Centre for Economic Research, Gaustadalléen 21, , 0349 Oslo, , Norway
Steinar Strøm: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: In 1989, an early retirement program (AFP) was introduced in Norway, with an eligibility age gradually decreasing from 66 to 62, and now covering about two thirds of the labour force. To assess the impact on the labour force we estimate a multinomial logit model for transitions between labour market states on quarterly panel data for 1988-II to 1999-IV. The estimated model tracks the development in transition rates and labour force quite well. Model simulations indicate that abolishing the AFP might increase the total labour force by almost two per cent in five years.

Keywords: Early retirement; panel data; econometric models

JEL-codes: D10; H55; J26

41 pages, January 28, 2002

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