The Impact of the Retirement Decision and Demographics on Pension Sustainability: A Dynamic Microsimulation Analysis
ConcepciÃ³ Patxot (),
Meritxell SolÃ© (),
Guadalupe Souto () and
Martin Spielauer ()
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ConcepciÃ³ Patxot: Departament de Teoria EconÃ²mica, Universitat de Barcelona.
Meritxell SolÃ©: Departament de Teoria EconÃ²mica, Universitat de Barcelona.
Guadalupe Souto: Departament dâ€™Economia Aplicada, Universitat AutÃ²noma de Barcelona.
Martin Spielauer: Austrian Institute of Economic Research (WIFO).
International Journal of Microsimulation, 2018, vol. 11, issue 2, 84-108
This paper investigates how retirement decisions, in interaction with demographic changes, impact on pension system sustainability. To do so, we introduce behaviour into a dynamic microsimulation model applied to the Spanish case. Specifically, the retirement decision is modelled using a reduced-form survival model that provides information on retirement hazards, which are then used to calculate times to retirement within the microsimulation model. This model allows us to account for behavioural responses. For example, the behavioural reaction to the 2011 reform improves pension system sustainability, despite individuals opting to retire later to obtain higher benefits. The positive effect (increase in contributions and reduction in time spent in retirement) is greater than the negative effect (increase in pension levels). Additionally, the model allows us to show how the positive effects of the education transition and higher rates of female and older worker participation contribute to reducing the negative impact of population ageing.
Keywords: DYNAMIC MICROSIMULATION; PENSION REFORMS; BEHAVIOURAL MODEL; AGEING (search for similar items in EconPapers)
JEL-codes: H53 H55 H68 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ijm:journl:v11:y:2018:i:2:p:84-108
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