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Assessing the Labour Supply Effect of Harmonising Regular Retirement Age in Austria

Author

Listed:
  • Benjamin Bittschi

    (WIFO)

  • Thomas Horvath
  • Helmut Mahringer

    (WIFO)

  • Christine Mayrhuber

    (WIFO)

  • Martin Spielauer

    (WIFO)

  • Philipp Warum

    (WIFO)

Abstract

The aim of this study is to assess the impact of the ongoing harmonisation of the retirement age for women with that for men on women's labour supply in Austria. According to the current legal framework, the standard retirement age for women will be gradually raised from 60 to 65 years from 2024 onwards, with the retirement age being raised by 6 months each year. The impact of the pension reform on women's labour supply is quantified using the dynamic microsimulation model microDEMS. This model integrates demographic changes in line with official population projections and detailed labour market modelling. According to our projections, the labour supply of women aged 60 to 64 increases by 87,000 in 2040 compared to a scenario in which the retirement age remains unchanged. We compare our results with two alternative approaches: the more stylised microWELT simulation model and a purely data-driven approach. While all methods produce very similar results in the long run, the detailed modelling in microDEMS provides more plausible results during the transition period when the reform is gradually implemented. This is because it allows for a realistic representation of pension paths, taking into account all relevant pension types and the corresponding eligibility criteria, such as sufficient accumulated insurance periods. In contrast to a purely data-driven approach, microDEMS modelling also has the advantage of explicitly representing and quantifying the components of the change in labour supply.

Suggested Citation

  • Benjamin Bittschi & Thomas Horvath & Helmut Mahringer & Christine Mayrhuber & Martin Spielauer & Philipp Warum, 2024. "Assessing the Labour Supply Effect of Harmonising Regular Retirement Age in Austria," WIFO Working Papers 673, WIFO.
    • Handle: RePEc:wfo:wpaper:y:2024:i:673
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    File URL: https://www.wifo.ac.at/wwa/pubid/71474
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    References listed on IDEAS

    as
    1. Haan, Peter & Tolan, Songül, 2019. "Labor supply and fiscal effects of partial retirement – The role of entry age and the timing of pension benefits," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).
    2. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1, July.
    3. Zwick, Thomas & Bruns, Mona & Geyer, Johannes & Lorenz, Svenja, 2022. "Early retirement of employees in demanding jobs: Evidence from a German pension reform," The Journal of the Economics of Ageing, Elsevier, vol. 22(C).
    4. Martin Spielauer & Thomas Horvath & Marian Fink, 2020. "microWELT: A Dynamic Microsimulation Model for the Study of Welfare Transfer Flows in Ageing Societies from a Comparative Welfare State Perspective," WIFO Working Papers 609, WIFO.
    5. Anders Karlstrom & Marten Palme & Ingemar Svensson, 2004. "A dynamic programming approach to model the retirement behaviour of blue-collar workers in Sweden," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 795-807.
    6. Kadir Atalay & Garry F. Barrett, 2015. "The Impact of Age Pension Eligibility Age on Retirement and Program Dependence: Evidence from an Australian Experiment," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 71-87, March.
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    Cited by:

    1. Thomas Horvath & Martin Spielauer & Philipp Warum, 2024. "Life Course Heterogeneity and the Future Labour Force – a Dynamic Microsimulation Analysis for Austria," WIFO Working Papers 674, WIFO.

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    Keywords

    Dynamic microsimulation; Pension reform; Labour force participation;
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