Early Retirement and Financial Incentives: Differences Between High and Low Wage Earners
AbstractThis paper investigates the impact of financial incentives on early-retirement behaviour for high and low wage earners. Using a stylized life-cycle model, we derive hypotheses on the behaviour of the two types. We use administrative data and employ two identification strategies to test the predictions. First, we exploit exogenous variation in the replacement rate over birth cohorts of workers who are eligible to a transitional early retirement scheme. Second, we employ a regression discontinuity design by comparing workers who are eligible and non-eligible to the transitional scheme. The empirical results show that low wage earners are, as predicted by the model, more sensitive to financial incentives. The results imply that low wage earners will experience a stronger incentive to continue working in an optimal early retirement scheme.
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Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 195.
Date of creation: Nov 2011
Date of revision:
Find related papers by JEL classification:
- J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-AGE-2011-12-13 (Economics of Ageing)
- NEP-ALL-2011-12-13 (All new papers)
- NEP-HRM-2011-12-13 (Human Capital & Human Resource Management)
- NEP-LAB-2011-12-13 (Labour Economics)
- NEP-LMA-2011-12-13 (Labor Markets - Supply, Demand, & Wages)
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