Early retirement policy in the presence of competing exit pathways: Evidence from policy reforms in Finland

A majority of older Finns withdraw from employment via early retirement schemes years before the statutory retirement age. Over the past 15 years, a series of policy reforms have been introduced to reduce the widespread use of early exit pathways. By exploiting variation in eligibility rules between different cohorts, this study examines the effects of changes in the eligibility age thresholds for unemployment and part-time pension schemes and the effect of tightening medical criteria for disability pension eligibility. The findings imply that these reforms have jointly raised the average age at which older workers leave employment by 3.9 months. This increase is mainly due to a sharp drop in disability pension enrolment from age 58 upwards and to a lower incidence of unemployment at younger ages. The policy effects are found to be heterogeneous, so that different subgroups were affected by different reforms.