The Institutional Determinants of Early Retirement in Europe

University of St. Gallen Economics Discussion Paper No. 2006-08

29 Pages Posted: 18 Apr 2006

See all articles by Justina A. V. Fischer

Justina A. V. Fischer

Organization for Economic Co-Operation and Development (OECD); Stockholm School of Economics; University of Hohenheim

Alfonso Sousa-Poza

University of Hohenheim - Institute of Household and Consumer Economics; IZA Institute of Labor Economics

Date Written: April 2006

Abstract

Low fertility rates combined with increases in early retirement pose a serious challenge to the sustainability of social security systems in most industrialized countries. Therefore, it is important for policy makers to understand the determinants of early retirement and especially the role that institutional factors play in the retirement decision. However, analyzing such factors ideally requires international microdata, which have in the past been largely unavailable. To fill this void, this paper investigates early retirement determinants across several European countries using the rich 2005 SHARE (Survey of Health, Aging and Retirement in Europe) microdataset, which produces more precise estimates of the effects of institutional and economic factors like pension systems, unemployment, and employment protection legislation. The analysis shows that pension systems offering generous early retirement options encourage early departure from the labor market. In addition, pension wealth accrual rate exerts a greater influence on early retirement decisions than does the average replacement rate, while stricter employment protection legislation has no significant impact.

Keywords: Early Retirement, Pensions, Pensions System, Employment Protection

JEL Classification: J26, J21, H55

Suggested Citation

Fischer, Justina A.V. and Sousa-Poza, Alfonso, The Institutional Determinants of Early Retirement in Europe (April 2006). University of St. Gallen Economics Discussion Paper No. 2006-08. Available at SSRN: https://ssrn.com/abstract=895081 or http://dx.doi.org/10.2139/ssrn.895081

Justina A.V. Fischer (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Stockholm School of Economics

PO Box 6501
Stockholm, 11383
Sweden

University of Hohenheim

Fruwirthstr. 48
Stuttgart, 70599
Germany

Alfonso Sousa-Poza

University of Hohenheim - Institute of Household and Consumer Economics ( email )

Fruwirthstrasse 48
Kavaliershaus 4 116
70599 Stuttgart
Germany
++49 (0)711/459-22863 (Phone)
++49 (0)711/459-23953 (Fax)

HOME PAGE: http://www.uni-hohenheim.de/hhoek/englisch/people/alfonsosousapoza/index.html

IZA Institute of Labor Economics

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

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