The Effect of Relabeling and Incentives on Retirement: Evidence from the Finnish Pension Reform in 2005

Working Papers 328 Ohto Kanninen, Terhi Ravaska, Jon Gruber, Satu Nivalainen and Roope Uusitalo

We exploit a reform in the Finnish public pension system in 2005 to study the effect of financial incentives (wealth effect and substitution effect) and relabeling of pensions on retirement decisions. These effects are distinguishable in the reform due to a heterogeneous, although correlated, impact of the reform on individuals. Relabeling in the reform means renaming the pension type from early retirement to full retirement based on age. Incentives were affected as a function of age and accrual-to-earnings ratio. We find that all three effects played a role. We show that the relabeling alone explains most of the immediate behavioral impact of the reform.

Published: June 6, 2019
ISBN: 978-952-209-184-0 (pdf)
ISSN: 1795-1801 (pdf)
JEL: D9, H55, H75, J14, J26
Publication (PDF)