Pension Knowledge and the Effectiveness of Pension Reforms

62 Pages Posted: 12 Jul 2021

See all articles by Tabea Bucher-Koenen

Tabea Bucher-Koenen

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA); ZEW – Leibniz Centre for European Economic Research

Irene Ferrari

Ca' Foscari University of Venice, Department of Economics; Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

Yuri Pettinicchi

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

Date Written: 2021

Abstract

This study examines how knowledge about institutional settings and their reform affects the effectiveness of those reforms. We examine this question in the context of social security, the largest social insurance program in Europe, by exploiting time and cross-country variation in pension regulations in seven European countries. We show that many individuals are not well informed about the pension rules applicable to them and that individuals with lower education and lower numeracy skills fail to update their knowledge when affected by pension reforms. Moreover, the effect of pension reforms on individuals‘ labour supply decisions is driven by well-informed individuals. This is the first study to separate information gathering from labour supply decision making, thus providing a causal link between the knowledge of pension rules and individuals‘ labour supply behaviour. Pension policies could potentially be more effective if individuals were adequately informed.

German Abstract:
In dieser Studie untersuchen wir, wie sich der individuelle Wissensstand über gesetzliche Regelungen und deren Reformen auf die Wirksamkeit dieser Reformen auswirkt. Wir untersuchen diese Frage im Kontext von Rentensystemen (den größten Sozialversicherungszweigen in Europa), indem wir die Variation in den Rentensystemen in sieben europäischen Ländern analysieren. Wir zeigen, dass viele Personen unzureichend über die für sie geltenden Rentenregelungen informiert sind. Insbesondere Personen mit niedrigem Bildungsstand und geringen Rechenkenntnissen erkennen nicht, wenn sich durch Reformen Änderungen für sie ergeben. Reformeffekte auf das Arbeitsangebot werden maßgeblich von gut informierten Einzelpersonen getrieben. Dies ist die erste Studie, die Informationsgewinnung und Entscheidungen über das Arbeitsangebot voneinander trennt. So können wir den kausalen Effekt von Wissensstand über Rentensysteme auf das individuelle Arbeitsangebotsverhalten bestimmen. Rentenpolitik könnte effektiver sein, wenn Individuen besser informiert würden.

Keywords: Expectations, Retirement age, Pension Reforms, SHARE

JEL Classification: J26, H55

Suggested Citation

Bucher-Koenen, Tabea and Bucher-Koenen, Tabea and Ferrari, Irene and Ferrari, Irene and Pettinicchi, Yuri, Pension Knowledge and the Effectiveness of Pension Reforms (2021). MEA Discussion Paper No. 06-2021, Available at SSRN: https://ssrn.com/abstract=3883256 or http://dx.doi.org/10.2139/ssrn.3883256

Tabea Bucher-Koenen (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

HOME PAGE: http://mea.mpisoc.mpg.de/

Irene Ferrari

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

Ca' Foscari University of Venice, Department of Economics ( email )

Yuri Pettinicchi

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany
+49-89-38602-301 (Phone)

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