Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/36354
Authors: 
Danzer, Alexander M.
Year of Publication: 
2010
Series/Report no.: 
IZA Discussion Papers 4726
Abstract: 
The retirement decision is under researched in developing and emerging countries, despite the topic's close relation to many development issues such as poverty reduction and social security, and despite the fact that population ageing will increasingly challenge the developing world. This paper uses a natural experiment from Ukraine to estimate the causal effect of a threefold increase in the legal minimum pension on labor supply and retirement behaviour at older ages. Applying difference-in-difference and regression discontinuity methods on two independent nationally representative data sets, the paper estimates a pure income effect that caused additional retirement of 30 to 47 percent. Additional evidence suggests that retirement incentives are stronger at the lower tail of the educational distribution and that the strict Labor Code curbed responses at the intensive labor supply margin. Although the substantial pension increase provided strong disincentives to work and put a heavy fiscal burden on Ukraine, it significantly reduced the propensity of falling into poverty for those in retirement.
Subjects: 
Labor supply
retirement
minimum pension
pure income effect
poverty
difference-in-differences
regression discontinuity
JEL: 
J26
I38
O15
Document Type: 
Working Paper

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