Pension incentives and early retirement

In this paper we exploit a cohort-specific pension reform to estimate the labour market effects of changes in the financial incentives to retire. In particular, we analyse the effects of the introduction of cohort-specific deductions for early retirement on female retirement, employment and unemploy...

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Bibliographic Details
Published in:Labour economics 2017-08, Vol.47, p.216-231
Main Authors: Engels, Barbara, Geyer, Johannes, Haan, Peter
Format: Article
Language:English
Subjects:
Actuarial deductions
Cohort-specific pension reform
Labour market effects
Labour supply
Pension reform
Retirement age
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Summary:In this paper we exploit a cohort-specific pension reform to estimate the labour market effects of changes in the financial incentives to retire. In particular, we analyse the effects of the introduction of cohort-specific deductions for early retirement on female retirement, employment and unemployment. For the empirical analysis we use high-quality administrative data from the German pension insurance. We present evidence for sizeable labour market effects. In addition to direct effects on women older than 60 we find important anticipation effects before reaching the pension eligibility age. Overall we document that the pension reform leads to a postponement of retirement, an increase in employment and a shifting in unemployment over age rather than a substitution into unemployment. •Examines labour supply effects of the introduction of pension deductions for women in Germany.•The pension reform increased the average retirement age of affected women by 15 months.•Women increased employment before and after reaching the pension eligibility age.•Overall unemployment did not change, affected women entered unemployment later.
ISSN:0927-5371
1879-1034
DOI:10.1016/j.labeco.2017.05.006