Social security and retirement in Spain

Sergi Jimenez-Martin and Franco Peracchi
Authors registered in the RePEc Author Service: Michele Boldrin

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper examines the interplay between the retirement incentives generated by the Spanish public pension system and the decision to early retire from the labor force. For many workers, particularly those with below--median earning profiles or with incomplete working histories, retirement at ages earlier then 65 appears to be the most rational strategy. Indeed we calculate that, exception made for workers in the upper twenty percent of the earnings distribution, the current system generates strong incentives to retire before the age of 65. We identify the minimum pension rule, embedded in the Spanish legislation, as the most important source of such incentives. We apply the insights from our study to a preliminary evaluation of the reform legislation just enacted (July 26, 1997). We find it doubtful that it may seriously weaken such incentives. On the contrary, the final outcome may be an increase in the proportion of workers for which the minimum pension is binding, thereby increasing the incentive to early retirement.

Keywords: Retirement; Pensions; incentives (search for similar items in EconPapers)
Date: 1997-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Chapter: Social Security and Retirement in Spain (1999)
Working Paper: Social Security and Retirement in Spain (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:6043

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