Family labour supply when the husband is eligible for early retirement.

When the husband works in the private sector in Norway the take-up rate of early retirement during the first twelve months after becoming eligible (once during 1993 and 1994) was around 40 percent. If the husband works in the public sector the corresponding take-up rate was around 25 percent. A model with forward-looking and utility maximising merried couples, where the husband only is eligible for early retirement, has been estimated on these data. The estimated model has been used to predict the labour supply responses of the husband and wife when pensions are taxed as wage earnings. Taxing early benefits as labour earnings induces a substantial decline in retirement and a substantial shift towards full-time work among males. Females tent to decrease their labour supply a little. An additionsl 10 percent in the pre-tax pensionincome has a positive impact on full-time work among both spouses, but the effect is a magnitude smaller than the effect obtained by changing taxation. Husbands in poor households tend to increase their labour supply more than husbands in rich households. Poor households are also more negatively hit in terms of loss in expected household welfare than the rich households.Early retirement; married couples; microeconometrics

Innovation and market dynamics in the EPO market

In this paper we study the demand and supply of erythropoietin in four Nordic countries, using an econometric model based on discrete choice and a random utility model. It measures the effect of price changes as well as the loyalty of patients and physicians to a drug. Our main aims are to estimate demand for EPO and to determine the degree of competition in this Nordic market. The main motivation for this paper is to analyze the impact of product innovation on market power and welfare, e.g. on consumer and producer surplus. The product innovation is the entry of Aranesp in the Nordic market.Discrete choice; demand for pharmaceuticals; monopolistic competition; EPO

Analyzing labor supply behavior with latent job opportunity sets and institutional choice constraints.

In this paper we discuss a general framework for analyzing labor supply behavior in the presence of complicated budget- and quantity constraints of which some may be unobservable. The point of departure is that an individual's labor supply decision can be considered as a choice from a set of discrete alternatives (jobs). These jobs are characterized by attributes such as hours of work, sector specific wages and other sector specific aspects of the jobs. We focus in particular on theoretical justification of functional form assumptions and properties of the random components of the model. The paper also includes an empirical application based on Norwegian data, in which the labor supply of married women is estimated.Labor supply; non-convex budget sets; non-pecuniary job-attributes; sector-specific wages

Labour Supply Effects of an Early Retirement Programme

In 1988, an early retirement program (AFP) was introduced in Norway for the 66-years-old. Since then, AFP has gradually been extended and by now it covers workers aged 62-66. In this paper we employ a multinominal logit model to study the transition between states in the labour market. The model is estimated on a large panel data set covering the period 1988-2 to 1999-4. The estimated model tracks the development quite well, as also outside sample predictions do. The model is used to assess the future labour market impact of abolishing AFP. We find that by abolishing AFP may increase the labour force participation among older men (55-67) in 2005 from 72 percent in the baseline projection to 83 percent. For females the corresponding increase is from 62 to 67 percent.Early retirement, large panel data sets, econometric models

Retirement in Non-Cooperative and Cooperative Families

Models that allow for non-cooperative as well as cooperative behavior of families are estimated on data from Norway in 1993 and 1994. The husband is eligible for early retirement while the wife is not. The models aim at explaining labor supply behavior of married couples the first twelve months after the husband became eligible for early retirement. Estimates and predictions derived from the different models are compared. Yet, no definite conclusion is reached with respect to what model is best at explaining the observed behavior. The models are employed to simulate the impacts on labor supply of taxing pension income the same way as labor income. We find that that this change of the tax system may reduce the propensity to retire early considerably.Family labor supply, retirement, econometric models, policy simulations

Rank Dependent Utility, Tax Evasion and Labor Supply

In the simple Allingham-Sandmo portfolio model of tax evasion an expected utility maximizer will cheat more than what is estimated in empirical studies. Two main types of explanation have been suggested as solutions to this puzzle: (1) Tax payers act according to some non-expected utility theory, and (2) Individual ethical norms and social stigma induce people not to cheat. In the present study we test two hypotheses within these broad explanations: (1) Tax payers are weighting subjective probabilities of being penalised according to the rank dependent utility theory, and (2) Tax payers’ beliefs about social norms have an effect on their decision to evade taxes. Our model is characterized by a simultaneous determination of tax evasion and labour supply, including the effect on tax payers of a social norm of not cheating. Using Norwegian survey data our hypotheses are corroborated. Our estimates imply that if the objective probability of being penalized is, say 3 %, the weighted probability is about 23 %. Our study provides an independent confirmation of the rank dependent expected utility theory. The model explains data 53% better than pure random choices and predicts hours worked in the regular economy, among tax evaders as well non tax evaders, rather precisely. The model is an example of a two sector choice model and the results indicate that an overall wage increase may shift labor supply away from the irregular part of the economy towards the regular.labor supply, tax evasion, rank dependent utility

Price regulation and generic competition in the pharmaceutical market

In March 2003 the Norwegian government implemented yardstick based price regulation schemes on a selection of drugs experiencing generic competition. The retail price cap, termed “index price”, on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998-2004 for the 6 drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.Discrete choice; demand for pharmaceuticals; monopolistic competition; evaluation of yardstick based price regulation

Longitudinal Analysis of Generic Substitution

Using an extensive longitudinal dataset extracted from the Norwegian Prescription Database (NorPD) containing all prescriptions written in the period January 2004 to June 2007, we selected two particular drugs (chemical substances) used against cholesterol. The two brand-name products on the Norwegian markets were Provachol (atc code C10AA03) and Zocor (atc code C10AA01). The generics are Provastatine and Simastatine. The model accounts for taste persistence and is estimated on panel data. We find that prices have a negative impact on transitions in the sense that an increase in the brand price will reduce the transition from generics to brand and likewise an increase in the generic price will reduce the transition from brand to generics.generics, substitution, microdata, random utility model, longitudinal data

Choosing among Competing Blockbusters: Does the Identity of the Third-Party Payer Matter for Prescribing Doctors?

TNF-alpha inhibitors represent one of the most important areas of biopharmaceuticals by sales, with three blockbusters accounting for 8 % of total pharmaceutical sale in Norway. With use of a unique natural policy experiment in Norway, this paper examines to what extent the identity of the third-party payer affects doctors’ choice between the three available drugs. We are able to investigate to what extent the price responsiveness of prescription choices is affected when the identity of the third-party payer changes. The three dominating drugs in this market, Enbrel, Remicade, and Humira, are substitutes, but have had different and varying funding schemes - hospitals and the national insurance plan. We find that treatment choices are price responsive, and that the price response is considerably higher when the doctor’s affiliated hospital covers the cost instead of a traditional fee-for-service insurance plan. When the doctors’ hospitals are covering the cost of this treatment instead of insurance the total cost of treatment is significantly reduced.pharmaceuticals, discrete choice model, funding-schemes