Early Retirement, Social Security and Well-Being in Germany
Axel H. Borsch-Supan
Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
University of Mannheim - Mannheim Research Institute for the Economics of Aging (MEA); German Institute for Economic Research (DIW Berlin)
July 2, 2004
NEW THEMES IN THE ECONOMICS OF AGING, D. A. Wise, ed., University of Chicago Press, 2004
MEA Discussion Paper No. 134-07
Germans retire early. On the one hand, early retirement is very costly and amplifies the burden which the German public pension system has to carry due to population aging. On the other hand, however, early retirement is also seen as a much appreciated social achievement which increases the well-being especially of those workers who suffer from work-related health problems.
This paper investigates the relation between early retirement and well-being using the GSOEP panel data. The general picture that emerges from our analysis is that early retirement as such seems to be related to subjective well-being, in fact more so than normal retirement. Early retirement most probably is a reaction to a health shock. Individuals are less happy in the year of early retirement than in the years before and after retirement. After retirement, individuals attain their pre-retirement satisfaction levels after a relatively short while. Hence, the early retirement effect on well-being appears to be negative and short-lived rather than positive and long. Whether this is an effect of retirement itself or a psychological adaptation to an underlying shock cannot be identified in our data and remains an open research issue waiting for a more objective measurement of health.
Number of Pages in PDF File: 43Accepted Paper Series
Date posted: August 11, 2009
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