Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/149902 
Year of Publication: 
2017
Series/Report no.: 
DIW Discussion Papers No. 1639
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
In aging societies, information on how to reform pension systems is essential to policy makers. This study scrutinizes effects of early retirement disincentives on retirement behavior, individual welfare, pensions and public budget. We employ administrative pension data and a detailed model of the German tax and social security system to estimate a structural dynamic retirement model. We find that retirement behavior is strongly influenced by the level of disincentives. Further, disincentives come at the cost of increasing inequality and individual welfare losses. Still, net public returns are about three times as high as monetarized individual welfare losses. Our estimates also suggest that similar levels of net public returns, if achieved by indiscriminating pension cuts, are associated with individual welfare losses that are more than twice as high.
Subjects: 
dynamic discrete choice
retirement
tax and pension system
pension reform
JEL: 
C61
H55
J26
Document Type: 
Working Paper

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