Longevity, life-cycle behavior and pension reform

Peter Haan and Victoria Prowse

MPRA Paper from University Library of Munich, Germany

Abstract: How can public pension systems be reformed to ensure fiscal stability in the face of increasing life expectancy? To address this pressing open question in public finance, we use micro data to estimate a structural life-cycle model of individuals' employment, retirement and consumption decisions. Our modeling approach allows life expectancy and the nature of the public pension system to influence the decisions of forward-looking individuals planning for retirement. We calculate that, in the case of Germany, an increase of 4.34 years in the full pensionable age or a cut of 37.7% in the per-year value of public pension benefits would offset the fiscal consequences of the 6.4 year increase in age 65 life expectancy anticipated to occur over the next 40 years. Of these two approaches to coping with the fiscal impact of improving longevity, increasing the full pensionable age generates the largest responses in labor supply and retirement behavior.

Keywords: Life Expectancy; Public Pension Reform; Retirement; Employment; Life-cycle Models; Consumption; Tax and Transfer System (search for similar items in EconPapers)
JEL-codes: D91 J11 J22 J26 J64 (search for similar items in EconPapers)
Date: 2012-06-06
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge and nep-lab
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Longevity, life-cycle behavior and pension reform (2014)
Working Paper: Longevity, Life-Cycle Behavior and Pension Reform (2011)
Working Paper: Longevity, Life-Cycle Behavior and Pension Reform (2011)
Working Paper: Longevity, Life-Cycle Behavior and Pension Reform (2011)
Working Paper: Longevity, Life-cycle Behavior and Pension Reform (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39282

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