samlet årgang - Økonomisk Institut - Københavns Universitet

THE EFFECT OF THE ’92-REFORM OF THE VERP ON RETIREMENT AGE 179
unemployment and lagged income. The estimator is calculated on the basis of information
for 1988, 1989, 1991 and 1993. The dummy for year (AFTER t ) is equal to one
for observations for 1989 and 1993, the dummy for group (VERP i ) is equal to one for
individuals in VERP1 and VERP2 respectively and the dummy for adjusting for different
trend (ADJUST j ) equals one for observations for 1991 and 1993. The estimate
of the coefficient on the interaction term equal to the product of the dummies for
years, groups and for adjustment for different trends ( 8 ) indicates whether the policy
change had the intended effect.
As the effect of the changes in the VERP program might be the delay of retirement
from age 60-62 to age 63 with an average of zero because retirement at age 65-66 at
the same time was hastened, separate pooled probit analyses are also carried out for
each of the retirement ages 60-66 years. In these analyses, the dependent variable is a
dummy that equals one if retirement takes place at the age in question.
6. Results
To examine the effect of the increase in delaying incentives in the VERP program
on the retirement age, a difference-in-differences estimator that is adjusted for differential
trends is applied. However, before turning to the results of this analysis, the
distributions of retirement age before and after 1992 are presented.
6.1. Distribution of retirement age
The changes of the VERP program in 1992 caused the financial incentives for retiring
at age 60-62 and age 65-66 to decrease, and the incentive for retiring at age 63 to
increase, while the effect on retirement at age 64 was uncertain. Therefore, provided
that the changes in the financial incentives have the intended effect, the effect on the
average retirement age depends on the distribution of retirement age before the changes
to the VERP policy.
Before 1992, the majority of individuals entitled to VERP retired before the age of
63 (see Figure 3 20 above). Therefore, if the changes in the financial incentives in 1992
had the intended effect, the average retirement age increased. For VERP1, however,
the distribution of the retirement age after 1992 was very similar to the situation before
1992. For VERP2, the share of people retiring at age 62 certainly decreased, but at
the same time age 65 retirement also decreased, age 60 retirement increased while the
tendency to retire at age 63 remained almost unchanged. These results indicate that the
changes in the financial incentives did not work as intended.
20. The columns for the average retirement age before 1992 are based on pooled information for the period
1987-1990. Information about 1991 is excluded due to the potential announcement effect. The »after 1992«
columns are based on pooled information for the period 1993-1998.