Effectiveness of early retirement disincentives: Individual welfare, distributional and fiscal implications

Timm Bönke, Daniel Kemptner () and Holger Lüthen

Labour Economics, 2018, vol. 51, issue C, 25-37

Abstract: In aging societies, information on how to reform pension systems is essential to policy makers. This study scrutinizes effects of early retirement disincentives on retirement behavior, individual welfare, pensions and public budget. We employ administrative pension data and a detailed model of the German tax and social security system to estimate a structural dynamic retirement model. We find that retirement behavior is strongly influenced by the level of disincentives. Further, disincentives come at the cost of increasing inequality and individual welfare losses. Still, net public returns are about three times as high as monetarized individual welfare losses. Our estimates also suggest that similar levels of net public returns, if achieved by indiscriminating pension cuts, are associated with individual welfare losses that are more than twice as high.

Keywords: Dynamic discrete choice; Retirement; Tax and pension system; Pension reform (search for similar items in EconPapers)
JEL-codes: C61 H55 J26 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927537117300842
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Effectiveness of Early Retirement Disincentives: Individual Welfare, Distributional and Fiscal Implications (2017)
Working Paper: Effectiveness of early retirement disincentives: Individual welfare, distributional and fiscal implications (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:51:y:2018:i:c:p:25-37

DOI: 10.1016/j.labeco.2017.11.004

Access Statistics for this article

Labour Economics is currently edited by A. Ichino

More articles in Labour Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().