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Pensions and labour-market participation in the United Kingdom

Journal article | American Economic Review

In this paper we begin by describing the labour market behaviour of individuals around pension age. We also consider the coverage of the various parts of the social security system. We go on to explain the structure of state pensions in the United Kingdom and compute the incentives for retirement that the structure creates, focusing on early retirement and the role of disability benefits, which are especially relevant for lower-skilled workers. We compare these incentives with those facing workers with private occupational schemes who now make up the majority of older workers close to retirement. The structure of incentives is found to match well with the observed patterns of labour market participation in the data.

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