Rates of return and early retirement disincentives: Evidence from a German pension reform

Holger Lüthen

No 2014/15, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: To counteract the financial pressure emerging in aging societies, statutory pay-as-you-go pension schemes are undergoing fundamental reforms in many Western countries. Starting with cohort 1937, Germany introduced permanent pension deductions for early retirement. This paper examines the evolution of the profitability of pension contributions against the background of this reform for cohorts 1935-1945. I measure the profitability with the internal rate of return (IRR) and use high quality administrative data. For men the IRR declines from 2.4% to 1.2% and for women from 5.2% to 3.7%. The results suggest that the deductions introduced by the reform only cause some part of this trend. The majority of the trend, about 75%-80%, is caused by increased pension contributions.

Keywords: pensions; reform; early retirement; disincentives; pay-as-you-go; rates of return; Germany (search for similar items in EconPapers)
JEL-codes: D02 D04 D14 D91 H55 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-acc, nep-age, nep-dem and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Rates of Return and Early Retirement Disincentives: Evidence from a German Pension Reform (2016)
Journal Article: Rates of Return and Early Retirement Disincentives: Evidence from a German Pension Reform (2016)
Working Paper: Rates of Return and Early Retirement Disincentives: Evidence from a German Pension Reform (2014)
Working Paper: Rates of Return and Early Retirement Disincentives: Evidence from a German Pension Reform (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:201415

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