Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Life Cycle and Labor Market Outcomes G05-V1
To counteract aging populations, statutory pay-as-you-go pension systems are subject to fundamental reforms in many Western societies. Starting with cohort 1937, Germany introduced permanent pension deductions for early retirement. This paper examines the evolution of the profitability of pension contributions against the background of this reform for cohorts 1935-1945. I measure the profitability with the internal rate of return (IRR) and use high quality administrative data. For men the IRR declines from 2.4% to 1.19% and for women from 5.15% to 3.72%. The results suggest that the deductions introduced by the reform only cause some part of this trend, with a major part caused by increases in contributions.