Early Retirement

Abstract

In the Netherlands a transition takes place from early retirement schemes, which are characterized by high implicit tax rates to schemes that have a higher degree of actuarial fairness. in this paper we look at the impact of this change at the labor participation rates of 55- to 65-year-old persons. The analysis has been applied on repeated choices on the basis of stated preferences. We estimate a mixed (or random parameters) logit model. The most important finding is the independent role that is played by the number of years for which has built up pension claims. Its impact does not only run via the discounted value of future pension streams. The results indicate that the change in the early retirement schemes will considerably increase labor participation. A participation rate of 50% for the age group under consideration is within reach.

Keywords: Preretirement, labor participation, mixed logit, stated preferences

JEL Classification: J26