Reforms of an Early Retirement Pathway in Germany and Their Labor Market Effects

Regina Riphahn and Rebecca Schrader ()
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Rebecca Schrader: University of Erlangen-Nuremberg

No 14908, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate the unemployment pathway to retirement in Germany and study the causal effects of two early retirement reforms. Reform 1 (NRA) increased normal retirement age stepwise from 60 to 65. Simultaneously, it became possible to use early retirement with benefit discounts. Reform 2 (ERA) increased the age of early retirement stepwise from 60 to 63. We investigate behavioral responses to the reforms using administrative data and difference-in-differences strategies. We find strong and significant causal effects of both reforms. Individuals postponed retirement, stayed employed longer, postponed unemployment, and shifted to alternative pathways into retirement. The overall use of the retirement system declined by about 1.5 and 2 months per person after each of the two reforms. Individuals with low pension wealth and those who were affected immediately by the reform responded more strongly.

Keywords: difference-in-differences; early retirement; causal effects; labor force participation; program substitution; effect heterogeneity (search for similar items in EconPapers)
JEL-codes: C21 H55 J26 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2021-12
New Economics Papers: this item is included in nep-age, nep-eur and nep-lma
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Citations: View citations in EconPapers (12)

Published - published in: Journal of Pension Economics and Finance, 2023, 22(3), 304-330.

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Journal Article: Reforms of an early retirement pathway in Germany and their labor market effects (2023)
Working Paper: Reforms of an Early Retirement Pathway in Germany and Their Labor Market Effects (2021)
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