Employer Compensation Policies, Public Transfer Programmes and Retirement Decisions

Paul Bingley and Gauthier Lanot

Keele Department of Economics Discussion Papers (1995-2001) from Department of Economics, Keele University

Abstract: The empirical retirement literature measures individual responses to variation in income flows due to public transfers, private individual or employer-provided pensions. The novelty of this paper is to provide a decomposition the incentive effects from these three sources. It is the first time that the effects of pay policies of different employers on retirement outcomes is explicitly modelled and empirically measured.Amodel of individual retirement is set up where employers may influence worker retirement age through pay policy. A conventional dynamic structural model is extended to allow both individual and employer heterogeneity. Empirically, identification of the employer effects on income and retirement is achieved by exploiting a longitudinal sample of Danish small-to-medium sized private sector establishments matched together with all of their workers. Identification of the effect of public transfers on income and retirement is through exogenous eligibility rules and reforms to a public early retirement programme. Employer specific compensation is found to be an important determinant of work and retirement income flows. However, employer effects on retirement age are only found among subsamples where access to public transfers is relatively limited.

Keywords: Retirement; pensions; matched employer-employee panel data. (search for similar items in EconPapers)
JEL-codes: C23 C25 C61 J26 (search for similar items in EconPapers)
Date: 1999, Revised 2000-06
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Published in European Economic Review, February, 2004, Vol 48(1), pages 181-200.

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