Early Retirement Behaviour in the Netherlands: Evidence from a Policy Reform

40 Pages Posted: 8 Mar 2006

See all articles by Rob Euwals

Rob Euwals

CPB Netherlands Bureau of Economic Policy Research; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Daniel J. van Vuuren

CPB Netherlands Bureau of Economic Policy Analysis

Ronald P. Wolthoff

University of Toronto - Department of Economics; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: March 2006

Abstract

In the early 1990s, the Dutch social partners agreed upon transforming the generous and actuarially unfair PAYG early retirement schemes into less generous and actuarially fair capital funded schemes. The starting dates of the transitional arrangements varied by industry sector. In this study, we exploit the variation in starting dates to estimate the causal impact of the policy reform on early retirement behaviour. We use a large administrative dataset, the Dutch Income Panel 1989-2000, to estimate hazard rate models for early retirement. We conclude that the policy reform induced workers to postpone early retirement. In particular, both the price effect (reducing implicit taxes) and the wealth effect (reducing early retirement wealth) are shown to have a positive impact on the early retirement age. Yet, we show that model specifications including the most commonly used financial incentive measures are open to further improvements, given that these are outperformed by a simple specification with dummy variables.

Keywords: early retirement, intertemporal choice, duration analysis

JEL Classification: C41, D91, J26

Suggested Citation

Euwals, Rob and van Vuuren, Daniel J. and Wolthoff, Ronald P., Early Retirement Behaviour in the Netherlands: Evidence from a Policy Reform (March 2006). IZA Discussion Paper No. 1992. Available at SSRN: https://ssrn.com/abstract=889033

Rob Euwals (Contact Author)

CPB Netherlands Bureau of Economic Policy Research ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands
+31 70 33 83 438 (Phone)
+31 70 33 83 350 (Fax)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 3894 302 (Phone)
+49 228 3894 210 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Daniel J. van Vuuren

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Ronald P. Wolthoff

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada

IZA Institute of Labor Economics

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

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