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Impact of the Changes in the Pension Formula on Workers' Decision to Retire

Author

Listed:
  • Dormidontova, Y.

    (Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration (ISAF RANEPA), Moscow, Russia)

  • Lyashok, V.

    (Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration (ISAF RANEPA), Moscow, Russia)

  • Nazarov, V.

    (Institute for Social Analysis and Forecasting, Russian Presidential Academy of National Economy and Public Administration (ISAF RANEPA), Moscow, Russia)

Abstract

The purpose of this paper is to estimate with the help of econometric methods, how sensitive the labour supply of elderly is to the changes in the pension system. We first analyze how a hypothetical increase of pension eligibility age would influence the economic activity of such individuals. The results of the simulation model show that a 5-year increase of pension eligibility age (up to 65 years for men and 60 years for women) would lead to an increase of economic activity of those whom this reform will concern by 11-14 pct. We next analyze how elderly would react to the changes in the pension legislation, which came into force in the beginning of 2015, in particular, the possibility to defer retirement in order to receive a higher pension later. Our estimates show that this mechanism gives incentives to postpone retirement only for women, but not for men.

Suggested Citation

  • Dormidontova, Y. & Lyashok, V. & Nazarov, V., 2015. "Impact of the Changes in the Pension Formula on Workers' Decision to Retire," Journal of the New Economic Association, New Economic Association, vol. 25(1), pages 57-75.
    • Handle: RePEc:nea:journl:y:2015:i:25:p:57-75
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    References listed on IDEAS

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    1. Ekaterina V. Galishnikova, 2013. "Mandatory Funded Component of the Pension System: Domestic and Foreign Experience," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 4, pages 135-144, December.
    2. James H. Stock & David A. Wise, 1990. "The Pension Inducement to Retire: An Option Value Analysis," NBER Chapters, in: Issues in the Economics of Aging, pages 205-230, National Bureau of Economic Research, Inc.
    3. Solovyev, A., 2012. "Pension Systems in the Context of Insurance Principles," Journal of the New Economic Association, New Economic Association, vol. 15(3), pages 141-166.
    4. David A. Wise, 1990. "Issues in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise90-1, July.
    5. E. Gurvich., 2011. "Roadmap for the New Pension Reform," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
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    More about this item

    Keywords

    pension system; retirees; retirement age; elderly employment; pension formula;
    All these keywords.

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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