Social Security and Retirement in Germany

Axel Borsch-Supan and Reinhold Schnabel

No 6153, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper describes the German public old age social security program (,Gesetzliche Rentenversicherung') and its incentive effects on retirement decisions. The paper presents the key features of the system and expresses retirement incentives in the form of accrual rates of social security wealth and implicit tax rates on earnings. It summarizes labor market behavior of older persons in Germany during the last 35 years and surveys the empirical literature on the effects of the social security system on retirement in Germany. The paper shows that even after the 1992 reform the German system is actuarially unfair. This generates a substantial redistribution from late to early retirees and creates incentives to early retirement. Indeed, average retirement age is very low in West Germany (about age 59) and even lower in East Germany. This tendency towards early retirement is particularly hurting in times of population aging when the German social security contribution rate is expected to increase dramatically and will substantially exceed the rates in other industrialized countries.

Date: 1997-08
Note: AG PE
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Published as Borsch-Supan, Axel and Reinhold Schnabel. "Social Security And Declining Labor-Force Participation In Germany," American Economic Review, Vol. 88, no. 2 (May 1998): 173-178
Published as Social Security and Retirement in Germany , Axel Borsch-Supan, Reinhold Schnabel. in Social Security and Retirement around the World , Gruber and Wise. 1999

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Chapter: Social Security and Retirement in Germany (1999)
Working Paper: Social security and retirement in germany (1997)
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