Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/168457 
Authors: 
Year of Publication: 
2017
Series/Report no.: 
DIW Discussion Papers No. 1679
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
This paper develops a structural dynamic retirement model to investigate effects and corresponding underlying mechanisms of a partial retirement program on labor supply, fiscal balances, and the pension income distribution. The structural approach allows for disentangling the two counteracting mechanisms that drive the employment effects of partial retirement: 1) the crowding-out from full-time employment, and 2) the movement from early retirement or unemployment to partial retirement. It also allows for investigating the role of financial compensations in a partial retirement program. Based on a unique German administrative dataset, I perform counterfactual policy simulations that analyze the role of partial retirement combined with financial subsidies and an increased normal retirement age. The results show that partial retirement extends working lives but reduces the overall employment volume. The fiscal consequences of partial retirement are negative but substantially less so when wages and pensions in partial retirement remain uncompensated. Partial retirement decreases inequality in pension income and provides a way to smooth consumption especially for retirees in lower income deciles in the context of an increased normal retirement age.
Subjects: 
Retirement
Partial Retirement
Social Security and Public Pensions
Structural estimation
Dynamic Discrete Choice
JEL: 
C61
J26
H55
Document Type: 
Working Paper

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