Endogenous retirement behavior of heterogeneous households under pension reforms

  • We propose a unified framework to measure the effects of different reforms of the pension system on retirement ages and macroeconomic indicators in the face of demographic change. A rich overlapping generations (OLG) model is built and endogenous retirement decisions are explicitly modeled within a public pension system. Heterogeneity with respect to consumption preferences, wage profiles, and survival rates is embedded in the model. Besides the expected direct effects of these reforms on the behavior of households, we observe that feedback effects do occur. Results suggest that individual retirement decisions are strongly influenced by numerous incentives produced by the pension system and macroeconomic variables, such as the statutory eligibility age, adjustment rates, the presence of a replacement rate, and interest rates. Those decisions, in turn, have several impacts on the macro-economy which can create feedback cycles working through equilibrium effects on interest rates and wages. Taken together, these reform scenarios have strong implications for the sustainability of pension systems. Because of the rich nature of our unified model framework, we are able to rank the reform proposals according to several individual and macroeconomic measures, thereby providing important support for policy recommendations on pension systems.

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Metadaten
Author:Axel Börsch-Supan, Klaus Härtl, Duarte N. Leite, Alexander Ludwig
URN:urn:nbn:de:hebis:30:3-472334
URL:https://ssrn.com/abstract=3235142
DOI:https://doi.org/10.2139/ssrn.3235142
Parent Title (English):SAFE working paper series ; No. 221
Series (Serial Number):SAFE working paper series (221)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2018
Year of first Publication:2018
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2018/09/05
Tag:labor supply; life-cycle behavior; pension reform; population aging; retirement age; social security; welfare
Issue:This draft: 25 April 2018
Page Number:52
HeBIS-PPN:436673568
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht