samlet årgang - Økonomisk Institut - Københavns Universitet

176
NATIONALØKONOMISK TIDSSKRIFT 2005. NR. 2
specific shock to behaviour co-incident with the 1992 change in the VERP, and secular
trends in labour market behaviour are common to individuals in both groups.
As for the first assumption, the Minister of Labour brought in a bill about changing
the VERP program in October 1991 and the law was passed in December 1991. According
to the Minister, the idea of changing the program arose from an article in a
newspaper half a year earlier, cf. »Ministry of Labour« (1991). The timing of these
events might imply that the results are biased by the actions of individuals who in 1991
anticipated the 1992 changes to the VERP. However, two opposite tendencies are present
and actually, these might have cancelled each other out. 17
The second assumption that there was no program specific shock to behaviour
co-incident with the 1992 changes in the VERP that affected the two groups differently
might be problematic. In fact, at the same time as the VERP program was changed
in 1992, the Transitional Benefit Program (TBP, overgangsydelse) was introduced.
This program, a sort of extension of the VERP program, was available from 1992 to
1996 for people 55-59 years old (and from 1994 for the 50-54-year-olds), who were
members of an unemployment insurance fund and had been unemployed for at least 12
out of 15 months. That is, people entitled to TBP constitute a subset of people who are
entitled to VERP at age 60. Therefore, the existence of the TBP program might cause
a potential sample selection problem since people who choose this program are not
selected for the VERP groups in the analysis because they are outside the labour force
at age 59. However, the entry of people into the TBP program was relatively limited
until 1995. In fact, only up to 2 percent of the 55-59-year-olds received TBP benefits
from 1992-1994, while the percentage rose to 5 and 9 percent in 1995 and 1996,
respectively. Therefore, to minimize the potential sample selection problem and due to
small sample size for the control group, information after 1994 is not utilized in the
analyses.
The third assumption is that secular trends in labour market behaviour are common
to individuals in both the VERP sample and the control group. Comparing the
development of the average retirement age for the control group and the two VERP
sample groups, respectively, can test this assumption (see Figure 2 below). The largest
difference is found when PEP is compared to VERP1. Part of this difference might be
that, contrary to people entitled to VERP, public servants in general suffer few layoffs
17. Because the 1992 reform meant that nobody entitled to VERP in 1991 was financially worse off if they
delayed retirement until after the 1992 changes, while in particular the 60-62-year-olds were better off, the
potential effect of the announcement on the retirement age in 1991 would be positive. However, in 1991 it
was also suggested that the age at which VERP benefits were first available should be raised from 60 to 62
years. For a while, the Minister of Labour received many letters from angry citizens who believed that this
change would come into force in January 1992, cf. »Ministry of Labour« (1991). These expectations in
1991 might have induced some people to retire earlier than planned, thereby having a negative effect on the
retirement age in 1991.