Delaying the normal and early retirement ages in Spain: behavioural and welfare consequences for employed and unemployed workers

Alfonso R. Sánchez, J. Ignacio García Pérez () and Sergi Jimenez-Martin

No 2014-06, Working Papers from FEDEA

Abstract: In this paper, we explore the links between pension reform, early retirement, and the use of unemployment as an alternative pathway to retirement. We use a dynamic rational expectations model to analyze the search and retirement behaviour of employed and unemployed workers aged 50 or over. The model is calibrated to reproduce the main reemployment and retirement patterns observed between 2002 and 2008 in Spain. It is subsequently used to analyze the effects of the 2011 pension reform in Spain, characterized by two-year delays in both the early and the normal retirement ages. We find that this reform generates large increases in labour supply and sizable cuts in pension costs, but these are achieved at the expense of very large welfare losses, especially among unemployed workers. As an alternative, we propose leaving the early retirement age unchanged, but penalizing the minimum pension (reducing its generosity in parallel to the cuts imposed on individual pension benefits, and making it more actuarially fair with age). This alternative reform strikes a better balance between individual welfare and labour supply stimulus.

Date: 2014-06
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge, nep-eur and nep-lab
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Delaying the Normal and Early Retirement Ages in Spain: Behavioural and Welfare Consequences for Employed and Unemployed Workers (2015)
Journal Article: Delaying the Normal and Early Retirement Ages in Spain: Behavioural and Welfare Consequences for Employed and Unemployed Workers (2014)
Working Paper: Delaying the normal and early retirement ages in Spain: behavioural and welfare consequences for employed and unemployed workers (2014)
Working Paper: Delaying the normal and early retirement ages in Spain: behavioural and welfare consequences for employed and unemployed workers (2014)
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