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Incentives to retire later a solution to the social security crisis?

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Author Info
BREYER, FRIEDRICH
KIFMANN, MATHIAS

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Abstract

As one possible solution to the well-known financing crisis of unfunded social security systems, an increase in the retirement age is a popular option. To induce workers to retire later, it has been proposed to strengthen the link between retirement age and benefit level. The present paper is devoted to analyzing the long-run financial implications of such a reform. We show that with actuarial adjustments the long-run contribution rate is an increasing function of the retirement age chosen by workers. Moreover, the implicit tax paid to the pension system by a participant can increase in the long run if the retirement age rises in response to a steep adjustment rule. In this sense, the proposed cure may worsen the disease. Finally, we show how the negative effects can be avoided by forming a capital stock from the additional revenues due to later retirement.

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Publisher Info
Article provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.

Volume (Year): 1 (2002)
Issue (Month): 02 (July)
Pages: 111-130
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:cup:jpenef:v:1:y:2002:i:02:p:111-130_00

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lindbeck, A. & Hassler, J., 1998. "Can and SHould a Pay-as-You-Go Pension System Mimic a Funded System?," Research Institute of Industrial Economics Working Papers 499, Research Institute of Industrial Economics (IFN).
    Other versions:
  2. Breyer, Friedrich, 2001. "Why Funding is not a Solution to the "Social Security Crisis"," IZA Discussion Papers 328, Institute for the Study of Labor (IZA). [Downloadable!]
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  3. Blundell, Richard & Johnson, Paul, 1998. "Pensions and Labor-Market Participation in the United Kingdom," American Economic Review, American Economic Association, vol. 88(2), pages 168-72, May. [Downloadable!] (restricted)
  4. Kapteyn, Arie & de Vos, Klaas, 1998. "Social Security and Labor-Force Participation in the Netherlands," American Economic Review, American Economic Association, vol. 88(2), pages 164-67, May. [Downloadable!] (restricted)
  5. Martin Feldstein & Jeffrey B. Liebman, 2001. "Social Security," NBER Working Papers 8451, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    • Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier. [Downloadable!] (restricted)
  6. Gruber, Jonathan & Wise, David, 1998. "Social Security and Retirement: An International Comparison," American Economic Review, American Economic Association, vol. 88(2), pages 158-63, May. [Downloadable!] (restricted)
  7. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Hassler, John & Lindbeck, Assar, 1997. "Optimal Actuarial Fairness in Pension Systems - a Note," Seminar Papers 609, Stockholm University, Institute for International Economic Studies. [Downloadable!]
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  9. Mathias Kifman & Dirk Schindler, 2000. "Smoothing the Implicit Tax Rate in a Pay-as-you-go Pension System," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(3), pages 261-, May.
  10. Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, vol. 88(2), pages 173-78, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Friedrich Breyer & Stefan Hupfeld, 2007. "On the Fairness of Early Retirement Provisions," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Walter H. Fisher & Christian Keuschnigg, 2007. "Pension Reform and Labor Market Incentives," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Enrique Fatás & Juan A. Lacomba & Francisco M. Lagos & Ana I. Moro, 2008. "Experimental tests on consumption, savings and pensions," ThE Papers 08/14, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
  4. Axel Börsch-Supan & Barbara Berkel, 2004. "Pension Reform in Germany: The Impact on Retirement Decisions," MEA discussion paper series 04062, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  5. Axel Börsch-Supan & Barbara Berkel, 2004. "Pension Reform in Germany: The Impact on Retirement Decisions," MEA discussion paper series 04062, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  6. Berkel, Barbara & Börsch-Supan, Axel, 2004. "Pension Reform in Germany:," Sonderforschungsbereich 504 Publications 04-62, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  7. Arnds, Pascal & Bonin, Holger, 2002. "Frühverrentung in Deutschland: Ökonomische Anreize und institutionelle Strukturen," IZA Discussion Papers 666, Institute for the Study of Labor (IZA). [Downloadable!]
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