samlet årgang - Økonomisk Institut - Københavns Universitet

THE EFFECT OF THE ’92-REFORM OF THE VERP ON RETIREMENT AGE 177
Average retirement age
64
63
62
61
1987 1988 1989 1990 1991 1992 1993 1994
Year
PEW1 PEW2 PEP
Figure 2. Average retirement age for 60-66-year-olds, VERP1, VERP2 and PEP,
1987-1994.
and have a high degree of job protection. The curves for VERP2 and PEP are more
similar although not completely parallel either. Part of this difference might be explained
by different gender composition of the two groups. Therefore, the overall picture
is that individuals eligible for PEP do not seem to experience all of the other influences
affecting people entitled to VERP.
One way to eliminate the different trend is to control for this difference by including
a third dummy capturing the trend adjustment in the analysis. In this way the differencein-differences
estimator is adjusted for the differential trends. As stated in Blundell
and Costa Dias (2000), formally, the problem can be written as:
E( DD )= +(kT –kC )(t1 – t0 ) (1)
where is the impact of the change, which in this context measures the excess outcome
growth for the VERP sample compared to the control group, t is the macroeconomic
effect and kT and kC indicate the differential macro effect across the VERP
sample (T) and the control (C) groups. The true effect of the change is only recovered
when kT = kC . According to Blundell and Costa Dias (2000) a possible solution to this
problem is to take another time interval, t* to t**, over which a similar macro trend has
occurred. More precisely, a period for which the macro trend matches the term
(kT –kC )(t1 – t0 ) in (1) is chosen. The differential adjusted difference-in-differences
estimator (TADD), which will consistently estimates , takes the following form: