Working Paper: NBER ID: w31628
Authors: Jonas Kolsrud; Camille Landais; Daniel Reck; Johannes Spinnewijn
Abstract: This paper analyzes consumption to evaluate the distributional effects of pension reforms. Using Swedish administrative data, we show that on average workers who retire earlier consume less while retired and experience larger drops in consumption around retirement. Interpreted via a theoretical model, these findings imply that reforms incentivizing later retirement incur a substantial consumption-smoothing cost. Turning to other features of pension policy, we find that reforms that redistribute based on early-career labor supply would have opposite-signed redistributive effects, while differentiating on wealth may help to target pension benefits toward those who are vulnerable to larger drops in consumption around retirement.
Keywords: Pension Reforms; Consumption; Retirement; Social Welfare
JEL Codes: H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| retirement age (J26) | consumption levels (E21) |
| early retirement (J26) | lower consumption (E21) |
| early retirement (J26) | larger drops in consumption (E21) |
| later retirement (J26) | higher consumption (D12) |
| retirement age (J26) | consumption dynamics (E21) |
| pension reforms (H55) | consumption-smoothing costs (D15) |
| early-career labor supply (J29) | redistributive effects (H23) |
| wealth-based pension benefits (H55) | target benefits toward vulnerable (H53) |
| retiring before age 60 (J26) | 10% decline in consumption (D12) |
| retiring after age 65 (J26) | no decline in consumption (D12) |