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Reforms of an Early Retirement Pathway in Germany and Their Labor Market Effects

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  • Regina T. Riphahn
  • Rebecca Schrader

Abstract

We investigate the unemployment pathway to retirement in Germany and study the causal effects of two early retirement reforms. Reform 1 (NRA) increased normal retirement age stepwise from 60 to 65. 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-indifferences 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, 2021. "Reforms of an Early Retirement Pathway in Germany and Their Labor Market Effects," CESifo Working Paper Series 9461, CESifo.
    • Handle: RePEc:ces:ceswps:_9461
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    References listed on IDEAS

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    Cited by:

    1. Moghadam, Hamed Markazi & Puhani, Patrick A. & Tyrowicz, Joanna, 2023. "Pension Reforms and Couples' Labour Supply Decisions," GLO Discussion Paper Series 1257, Global Labor Organization (GLO).
    2. Octave Brouwer & Ilan Tojerow, 2024. "Old-age unemployment and labour supply: an application to Belgium," Empirical Economics, Springer, vol. 67(1), pages 253-287, July.
    3. Rebecca Schrader, 2021. "The causal effect of partial retirement on older workers’ labor force participation," Working Papers 215, Bavarian Graduate Program in Economics (BGPE).
    4. Christian Merkl, 2022. "Perspektiven zum Bürgergeld [Perspectives on Germany’s Welfare Reform (“Bürgergeld”)]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(2), pages 86-89, February.

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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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