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

Rob Euwals () and Elisabetta Trevisan ()
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Rob Euwals: CPB Netherlands Bureau for Economic Policy Analysis

No 8466, IZA Discussion Papers from IZA Network @ LISER

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 a linear random effects model to test the predictions. We exploit exogenous variation in the replacement rate over birth cohorts of workers who are eligible to a transitional early retirement scheme. The empirical results show that low wage earners are, as predicted by the model, more sensitive to financial incentives. This implies that low wage earners will experience a stronger incentive to continue working in an early retirement scheme with a low implicit tax rate.

Keywords: pensions; early retirement; labour market behaviour (search for similar items in EconPapers)
JEL-codes: J16 J22 J61 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014-09
New Economics Papers: this item is included in nep-age, nep-eur and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp8466

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