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Incentive Effects of Social Security on Labor Force Participation: Evidence in Germany and Across Europe

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  • Börsch-Supan, Axel

    (Sonderforschungsbereich 504)

Abstract

All acros Europe, old age labor force participation has declined dramatically during the last decades. This secular trend coincides with population aging. The European social security systems therefore face a double threat: Retirees receive pensions for a longer time while there are less workers per retiree to shoulder the financial burden of the pension systems. This paper shows that a significant part of this problem is homemade: most European pension systems provide strong incentives to retire early. The correlation between the force of these incentives with old age labor force participation is strongly negative. The paper provides qualitative and econometric evidence for the strength of the incentive effects on old age labor supply across Europe and for the German public pension program.

Suggested Citation

  • Börsch-Supan, Axel, 1998. "Incentive Effects of Social Security on Labor Force Participation: Evidence in Germany and Across Europe," Sonderforschungsbereich 504 Publications 98-29, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    • Handle: RePEc:xrs:sfbmaa:98-29
    Note: Financial Support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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    Cited by:

    1. Darwin Cortés & Darío Maldonado & Giselle Vesga, 2015. "Parametric Pension Reform and the Intensive Margin of Labor Supply, Evidence from Colombia," Documentos de Trabajo 12476, Universidad del Rosario.
    2. Arnds, Pascal & Bonin, Holger, 2002. "Frühverrentung in Deutschland: Ökonomische Anreize und institutionelle Strukturen," IZA Discussion Papers 666, Institute of Labor Economics (IZA).
    3. Börsch-Supan, Axel, 2002. "Eine Blaupause für eine nachhaltige Rentenreform in Deutschland," MEA discussion paper series 02001, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    4. Estelle James & Alejandra Cox Edwards, 2005. "Do Individual Accounts Postpone Retirement: Evidence from Chile," Working Papers wp098, University of Michigan, Michigan Retirement Research Center.
    5. Börsch-Supan, Axel, 2002. "Nach der Reform ist vor der Reform: Weitere Schritte für eine nachhaltige Reform der Altersvorsorge in Deutschland," MEA discussion paper series 02015, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    6. Islamov, Bakhtiyor & Shadiev, Rustam, 2003. "Pension System of Uzbekistan: Problems and Perspectives," Discussion Paper 143, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    7. Alejandra Cox Edwards & Estelle James, 2010. "Impact of Social Security Reform on Labor Force Participation Rates of Pensioners and Nonpensioners: Evidence from Chile," Journal of Human Capital, University of Chicago Press, vol. 4(2), pages 130-172.
    8. Börsch-Supan, Axel, 2002. "A Blue Print For Germany’s Pension Reform," MEA discussion paper series 02002, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.

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