On Welfare Effects of Increasing Retirement Age

Joanna Tyrowicz and Krzysztof Makarski

No 201804, IAAEU Discussion Papers from Institute of Labour Law and Industrial Relations in the European Union (IAAEU)

Abstract: We develop an OLG model with realistic assumptions about longevity to analyze the welfare effects of raising the retirement age. We look at a scenario where an economy has a pay-as-you-go defined benefit scheme and compare it to a scenario with defined contribution schemes (funded or notional). We show that, initially, in both types of pension system schemes the majority of welfare effects comes from adjustments in taxes and/or prices. After the transition period, welfare effects are predominantly generated by the preference for smoothing inherent in many widely used models. We also show that although incentives differ between defined benefit and defined contribution systems, the welfare effects are of comparable magnitude under both schemes. We provide an explanation for this counter-intuitive result.

Keywords: longevity; PAYG; retirement age; pension system reform; welfare (search for similar items in EconPapers)
JEL-codes: C68 E21 H55 J11 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-age, nep-dge, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://iaaeu.de/images/DiscussionPaper/2018_04.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: On welfare effects of increasing retirement age (2019)
Working Paper: On Welfare Effects of Increasing Retirement Age (2018)
Working Paper: On welfare effects of increasing retirement age (2017)
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:iaa:dpaper:201804

Access Statistics for this paper

More papers in IAAEU Discussion Papers from Institute of Labour Law and Industrial Relations in the European Union (IAAEU) Contact information at EDIRC.
Bibliographic data for series maintained by Adrian Chadi ().