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Social security and retirement in Spain

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  • Boldrin, Michele
  • Jiménez-Martín, Sergi
  • Peracchi, Franco

Abstract

This paper examines the interplay between the retirement incentives generated by the Spanish public pension system and the decision to early retire from the labor force. For many workers, particularly those with below--median earning profiles or with incomplete working histories, retirement at ages earlier then 65 appears to be the most rational strategy. Indeed we calculate that, exception made for workers in the upper twenty percent of the earnings distribution, the current system generates strong incentives to retire before the age of 65. We identify the minimum pension rule, embedded in the Spanish legislation, as the most important source of such incentives. We apply the insights from our study to a preliminary evaluation of the reform legislation just enacted (July 26, 1997). We find it doubtful that it may seriously weaken such incentives. On the contrary, the final outcome may be an increase in the proportion of workers for which the minimum pension is binding, thereby increasing the incentive to early retirement.

Suggested Citation

  • Boldrin, Michele & Jiménez-Martín, Sergi & Peracchi, Franco, 1997. "Social security and retirement in Spain," UC3M Working papers. Economics 6043, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:6043
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    References listed on IDEAS

    as
    1. José A. Herce., "undated". "La reforma de las pensiones en España: Aspectos analíticos y aplicados," Working Papers 96-25, FEDEA.
    2. Juan F. Jimeno & Omar Licandro, "undated". "El equilibrio financiero de un sistema de reparto de pensiones de jubilación: Una aplicación al caso español," Working Papers 96-21, FEDEA.
    3. Ana Martín Marcos & Lourdes Moreno, 1990. "Efectos de las pensiones de la seguridad social sobre la oferta de trabajo en España," Investigaciones Economicas, Fundación SEPI, vol. 14(2), pages 291-303, May.
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    Keywords

    Retirement;

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