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Micro-Modeling of Retirement Decisions in Germany

In: Social Security Programs and Retirement around the World: Micro-Estimation

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  • Axel Börsch-Supan
  • Reinhold Schnabel
  • Simone Kohnz
  • Giovanni Mastrobuoni

Abstract

Early retirement in Germany is very costly and amplifies the burden which the German public pension system has to carry due to population aging. This paper shows that the German pension system provides strong incentives to retire early. The paper provides relatively robust econometric evidence for the strength of incentive effects on old age labor supply, using several specifications of incentive variables. The econometric estimates are used to simulate the individual responses to policy changes. The adjustment factors for early retirement introduced by the 1992 pension reform are estimated to increase the retirement age of men by about 1.5 years. This increase is almost the same as the effect from a shift in the “normal retirement†age from 65 to 67. Introducing (almost) fair adjustments (6% per year of delay) would increase the retirement age by about 2 years and 2 months. The effects are about half the size for women.
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Suggested Citation

  • Axel Börsch-Supan & Reinhold Schnabel & Simone Kohnz & Giovanni Mastrobuoni, 2004. "Micro-Modeling of Retirement Decisions in Germany," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 285-344, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:10703
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    References listed on IDEAS

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    21. repec:crr:crrwps:2003-04 is not listed on IDEAS
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