Family Labour Supply when the Husband is Eligible for Early Retirement

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Hernæs, Erik and Steinar Strøm




Andre skrifter
ICER working paper series no 4


When the husband works in the private sector in Norway the take-up rate of early retirement during the first twelve months after becoming eligible (once during 1993 and 1994) was around 40 percent. If the husband works in the public sector the corresponding take up rate was around 25 percent. A model with forward-looking and utility maximising married couples, where the husband only is eligible for early retirement, has been estimated on these data. The estimated model has been used to predict the labour supply responses of the husband and wife when pensions are taxed as wage earnings. Taxing early benefits as labour earnings induces a substantial decline in retirement and a substantial shift towards full-time work among males. Females tend to decrease their labour supply a little. An additional 10 per cent cut in the pre-tax pension income has a positive impact on full-time work among both spouses, but the effect is a magnitude smaller than the effect obtained by changing taxation. Husbands in poor households tend to increase their labour supply more than husbands in rich households. Poor households are also more negatively hit in terms of loss in expected household welfare than the rich households.


D10, J22, J26


Early retirement, married couples, microeconometrics


Oppdragsgiver: Norges forskningsråd
Oppdragsgivers prosjektnr.:
Frisch prosjekt: 1202 - Pension schemes, work activity and retirement behaviour