Leaving Already? The Swedish Unemployment Insurance as a Pathway to Retirement

Sammanfattning: This paper studies whether Swedish workers use the unemployment insurance (UI) system as a pathway to retirement. We use longitudinal register data consisting of weekly UI benefit payments for the period 1999 to 2015. In Sweden, individuals are eligible for UI benefits for a maximum of 427 days. This creates an artificial benefit threshold at 427 days prior to the official retirement age. We use a novel quasi-experimental approach that exploits the distribution of UI benefits and started UI spells close to retirement. We find that a disproportionate large share of total UI spells start at this threshold, which indicates that individuals seek to maximize benefits before retiring. Our results detect moral hazard and suggest that UI benefits induce early retirement. Furthermore, the results suggest that individuals use UI benefits in a strategic manner.