Pension Incentives and Early Retirement

41 Pages Posted: 14 Nov 2016

See all articles by Barbara Engels

Barbara Engels

German Institute for Economic Research (DIW Berlin)

Johannes Geyer

German Institute for Economic Research (DIW Berlin)

Peter Haan

DIW Berlin, German Institute for Economic Research; IZA Institute of Labor Economics

Date Written: November 2016

Abstract

In this paper we exploit a cohort-specific pension reform to estimate the causal labour market effects of changes in the financial incentives to retire. In particular, we analyze the effects of the introduction of cohort-specific deductions for early retirement on female retirement, employment and unemployment. For the empirical analysis we use high-quality administrative data from the German pension insurance. We present evidence for sizable labour market effects. In addition to direct effects on women older than 60 we find important anticipation effects before reaching the pension eligibility age. Overall we document that the pension reform leads to a postponement of retirement, an increase in employment and a shifting in unemployment over age rather than a substitution into unemployment.

Keywords: Retirement age, pension reform, labour supply, actuarial deductions, cohort-specific pension reform, labour market effects

JEL Classification: J14, J18, J22, J26, H21

Suggested Citation

Engels, Barbara and Geyer, Johannes and Haan, Peter, Pension Incentives and Early Retirement (November 2016). DIW Berlin Discussion Paper No. 1617, Available at SSRN: https://ssrn.com/abstract=2869063 or http://dx.doi.org/10.2139/ssrn.2869063

Barbara Engels

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Johannes Geyer (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

HOME PAGE: http://www.diw.de/programme/jsp/MA.jsp?uid=jgeyer&language=en

Peter Haan

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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