Pension reform and the efficiency-equity trade-off: Impacts of removing an early retirement subsidy

We provide empirical evidence that the removal of work disincentives embedded in retirement earnings tests can increase old-age labor supply considerably, but it does so at cost more income inequality. To identify causal effects, we exploit a reform Norwegian early program, which entailed adjacent birth cohorts faced completely different incentives from age 62. The removed strict test such pension wealth was redistributed to late retirees. Given pre-existing employment and patterns, this implied considerable rise In theory, direct inequality could be either amplified or offset by changes supply. estimate triggered 42% average hours worked during period covered options; however, as responses were similar magnitudes across distribution, they did little modify As measured Gini coefficient, overall rose approximately 0.03 (21%).