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Labor market effects of early retirement reforms

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  • Regina T. Riphahn
  • Rebecca Schrader

Abstract

We study causal effects of two early retirement reforms. Reform 1 (NRA) increased normal retirement age stepwise from 60 to 63. 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.

Suggested Citation

  • Regina T. Riphahn & Rebecca Schrader, 2020. "Labor market effects of early retirement reforms," Working Papers 199, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:199_riphahnschrader
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    File URL: https://bgpe.cms.rrze.uni-erlangen.de/files/2023/07/199_Labor-market-effects-of-early-retirement-reforms.pdf
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    References listed on IDEAS

    as
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    1. Lorenz, Svenja & Zwick, Thomas & Bruns, Mona, 2022. "Beware of the employer: Financial incentives for employees may fail to prolong old-age employment," The Journal of the Economics of Ageing, Elsevier, vol. 21(C).

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    More about this item

    Keywords

    early retirement; program substitution; labor force participation; causal effects; difference-in-differences; effect heterogeneity;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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