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Earnings test, non-actuarial adjustments and flexible retirement

Börsch-Supan, Axel, Klaus Härtl and Duarte Semedo Leite ()

Economics Letters, 2018, vol. 173, issue C, 78-83

Abstract: In response to the challenges of increasing longevity, many countries have introduced “flexibility reforms” for their public pension systems. A key measure of these reforms is the abolishment of earnings tests. It is claimed that these reforms increase labor supply and therefore the financial sustainability of pension systems. We build a simulation model to show that abolishing an earnings test may indeed create more labor supply but simultaneously reduce the average claiming age when adjustments remain less than actuarial, as is the case in most European pension systems. Flexibility reforms may therefore worsen rather than improve the sustainability of public pension systems.

Keywords: Population aging; Social security; Public insurance; Pension reform; Life-cycle saving; Labor supply; Retirement age (search for similar items in EconPapers)
JEL-codes: D91 E17 E21 H55 J11 J22 J26 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Earnings Test, Non-actuarial Adjustments and Flexible Retirement (2018) Downloads
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