Joint Retirement in Couples: Evidence of Complementarity in Leisure

Abstract

This paper examines leisure complementarities in the joint retirement decisions of couples by quantifying the effect of the 2011 Norwegian pension reform. The reform abolished an earnings test on early retirement benefits for private sector workers, but not for public sector workers. I analyze population‐wide registry data on labor market participation and consider couples where the focal partner works in the public sector with a spouse either employed in the private sector (treatment group) or the public sector (control group). I find that spousal spillovers account for over 40 percent of the aggregate employment effect for women. They claim less early retirement benefits, and both men and women pay additional labor income taxes. In total, government budgets improved by approximately $46 million due to the spousal spillover effect between 2012–2015.