Abstract:
In this paper, the impact of the West German pension system on the retirement decisions of elderly citizens is analyzed within the framework of a discrete-time hazard rate model deduced from a micro-economic decision rule. The model is estimated using a balanced panel of elderly West German citizens. In order to improve the precision of the estimates obtained, the data from the sample are combined with aggregate-level information on the labour force participation behaviour of the elderly. Policy-related simulation experiments based on the estimates reveal that the probability of early retirement can be reduced significantly by appropriate changes in the pension system.