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An evaluation of the life cycle effects of minimum pensions on retirement behavior

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  • Sergi Jiménez-Martín

    (Department of Economics, Universitat Pompeu Fabra, Barcelona, Spain)

  • Alfonso R. Sánchez Martín

    (Department of Economics, Universidad Pablo de Olavide, Seville, Spain)

Abstract

In this paper we explore the effects of the minimum pension program on welfare and retirement in Spain. This is done with a stylized life cycle model which provides a convenient analytical characterization of optimal behavior. We use data from the Spanish Social Security to estimate the behavioral parameters of the model and then simulate the changes induced by the minimum pension in aggregate retirement patterns. The impact is substantial: there is a threefold increase in retirement at 60 (the age of first entitlement) with respect to the economy without minimum pensions, and total early retirement (before or at 60) is almost 50% larger. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Sergi Jiménez-Martín & Alfonso R. Sánchez Martín, 2007. "An evaluation of the life cycle effects of minimum pensions on retirement behavior," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(5), pages 923-950.
    • Handle: RePEc:jae:japmet:v:22:y:2007:i:5:p:923-950
    DOI: 10.1002/jae.956
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Los parámetros del sistema de pensiones: generosidad, redistribución y políticas de mínimos
      by Sergi Jiménez in Nada Es Gratis on 2010-10-30 03:30:50

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    Cited by:

    1. Alfonso Sánchez & Virginia Sánchez Marcos, 2008. "Demographic Change, Pension Reform and Redistribution in Spain," Working Papers 2008-14, FEDEA.
    2. Glomm, Gerhard & Jung, Juergen & Tran, Chung, 2009. "Macroeconomic implications of early retirement in the public sector: The case of Brazil," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 777-797, April.
    3. Clement Joubert, 2011. "Pension design with a large informal labor market: evidence from Chile," 2011 Meeting Papers 1136, Society for Economic Dynamics.
    4. García-Pérez, J. Ignacio & Jiménez-Martín, Sergi & Sánchez-Martín, Alfonso R., 2013. "Retirement incentives, individual heterogeneity and labor transitions of employed and unemployed workers," Labour Economics, Elsevier, vol. 20(C), pages 106-120.
    5. Miguel Sánchez Romero & Concepció Patxot & Elisenda Renteria & Guadalupe Souto, 2010. "From transfers to capital: analyzing the Spanish demand for wealth using NTA," MPIDR Working Papers WP-2010-029, Max Planck Institute for Demographic Research, Rostock, Germany.
    6. Alvaro Forteza & Graciela Sanromán, 2011. "Estimación de un modelo estructural para las decisiones de retiro en Uruguay," Documentos de Trabajo (working papers) 2411 Classification-JEL :, Department of Economics - dECON.
    7. Clement Joubert, 2010. "Dynamic labor supply and saving incentives in privatized pension systems: evidence from Chile," 2010 Meeting Papers 291, Society for Economic Dynamics.
    8. Sánchez Martín, Alfonso R., 2010. "Endogenous retirement and public pension system reform in Spain," Economic Modelling, Elsevier, vol. 27(1), pages 336-349, January.
    9. J. García-Pérez & Alfonso Sánchez-Martín, 2015. "Fostering job search among older workers: the case for pension reform," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-34, December.
    10. Miguel Sánchez-Romero & Concepció Patxot & Elisenda Rentería & Guadalupe Souto, 2013. "On the effects of public and private transfers on capital accumulation: some lessons from the NTA aggregates," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(4), pages 1409-1430, October.
    11. Alvaro Forteza & Irene Mussio, 2012. "Assessing Redistribution in the Uruguayan Social Security System," Journal of Income Distribution, Ad libros publications inc., vol. 21(1), pages 65-87, March.
    12. José Ignacio García & Alfonso R. Sánchez Martín, 2008. "Social security and the search behaviour of workers approaching retirement," Economic Working Papers at Centro de Estudios Andaluces E2008/10, Centro de Estudios Andaluces.
    13. J. Ignacio Conde-Ruiz & Clara I. González, 2016. "From Bismarck to Beveridge: the other pension reform in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 461-490, November.
    14. Julian Diaz Saavedra, 2013. "Age-dependent Taxation, Retirement Behavior, and Work Hours Over the Life Cycle," ThE Papers 13/09, Department of Economic Theory and Economic History of the University of Granada..
    15. Jochem de Bresser & Raquel Fonseca & Pierre-Carl Michaud, 2016. "Retirement Behavior in the U.S. and Europe," Cahiers de recherche 1609, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    16. Clara Isabel González & J. Ignacio Conde-Ruiz & Michele Boldrin, 2008. "Immigration and Social Security in Spain," Working Papers 2008-36, FEDEA.
    17. Alvaro Forteza & Ianina Rossi, 2010. "¿Qué protección social ofrecería un pilar de “cuentas nocionales” en Uruguay?," Documentos de Trabajo (working papers) 0210, Department of Economics - dECON.
    18. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    19. María José Luengo-Prado & Almudena Sevilla-Sanz, 2010. "Consumption, retirement and life-cycle prices: Evidence from Spain," Working Papers 2010-18, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
    20. Jose Ignacio García Pérez & Alfonso R. Sánchez Martín, 2010. "Social Security and the job search behavior of workers approaching retirement," Working Papers 2010-26, FEDEA.
    21. Javier Diaz-Gimenez & Julian Diaz-Saavedra, 2009. "Delaying Retirement in Spain," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 147-167, January.
    22. Robalino, David A. & Zylberstajn, Eduardo & Zylberstajn, Helio & Afonso, Luis Eduardo, 2008. "An ex-ante evaluation of the impact of social insurance policies on labor supply in Brazil : the case for explicit over implicit redistribution," Social Protection Discussion Papers and Notes 90342, The World Bank.
    23. Petra Todd & Viviana Vélez-Grajales, 2008. "How Pension Rules Affect Work and Contribution Patterns: A Behavioral Model of the Chilean Privatized Pension System," Working Papers wp193, University of Michigan, Michigan Retirement Research Center.
    24. Sergi Jiménez Martín & Judit Vall Castello, 2009. "Business Cycle Effects on Labour Force Transitions for Older People in Spain," Working Papers 2009-25, FEDEA.
    25. Alvaro Forteza, 2011. "Assessing Redistribution within Social Insurance Systems.The cases of Argentina, Brazil, Chile, Mexico and Uruguay," Documentos de Trabajo (working papers) 1311, Department of Economics - dECON.

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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