The Price of Love

Congratulations Marieke Bos and coauthors Jenny Säve-Söderbergh and Wenli Li who have received funding from FORTE for the project “The Price of Love” The Financial and Labor Market Effects of (i) Sharing Pension Rights with your Spouse and (ii) Relocation decisions within the Household.

The project aims to analyze the financial consequences of the interaction between labor market participation, family formation, income, and savings over the lifecycle, exploiting differences between cohorts and marital status in the possibility to share their pension savings with one’s spouse pre- and post-death. 

Despite Sweden being a relatively gender equal country, women’s total pension savings were only 68 percent of men’s total pension savings in 2018. Since women are also more likely to be alone during their retirement age they are twice as many retired women that end up below the poverty line than men (Pensionsmyndigheten, 2018). Moreover, the forecast of pension gaps shows that women born between 1985 and 1990 are expected to have pensions that are approximately four-fifths of the pensions of men born in the same period (ISF, 2018).

 

With the aim of compensating women for lost pension income from an unequal division of non-paid household labor, Sweden introduced the legal possibility for yearly voluntary irreversible transfers of pension rights between spouses and registered partners in 2000. Although it might appear that these transfers would equalize spouses’ pension income, the reality is more complex. Transfers might impact on the receiver’s labor supply decision and give a counteracting effect of a lower pension: a woman might decide to work less if she knows that she is being compensated by a transfer of pension rights. This compensation might, in turn, be smaller than her loss in pension income from the reduced labor supply. The empirical consequences are, thus, unclear, but will be explored by this project.