Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners

Rob Euwals (r.w.euwals@cpb.nl) and Elisabetta Trevisan
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Rob Euwals: CPB Netherlands Bureau for Economic Policy Analysis

No 195, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: This paper investigates the impact of financial incentives on early-retirement behaviour for high and low wage earners. Using a stylized life-cycle model, we derive hypotheses on the behaviour of the two types. We use administrative data and employ two identification strategies to test the predictions. First, we exploit exogenous variation in the replacement rate over birth cohorts of workers who are eligible to a transitional early retirement scheme. Second, we employ a regression discontinuity design by comparing workers who are eligible and non-eligible to the transitional scheme. The empirical results show that low wage earners are, as predicted by the model, more sensitive to financial incentives. The results imply that low wage earners will experience a stronger incentive to continue working in an optimal early retirement scheme.

JEL-codes: J16 J22 J61 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-age, nep-hrm, nep-lab and nep-lma
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:195

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