Advanced Search
MyIDEAS: Login to save this paper or follow this series

Longevity, Life-Cycle Behavior and Pension Reform

Contents:

Author Info

  • Peter Haan
  • Victoria Prowse

Abstract

How can public pension systems be reformed to ensure fiscal stability in the face of increasing life expectancy? To address this pressing open question in public finance, we estimate a life-cycle model in which the optimal employment, retirement and consumption decisions of forward-looking individuals depend, inter alia, on life expectancy and the design of the public pension system. We calculate that, in the case of Germany, the fiscal consequences of the 6.4 year increase in age 65 life expectancy anticipated to occur over the 40 years that separate the 1942 and 1982 birth cohorts can be offset by either an increase of 4.34 years in the full pensionable age or a cut of 37.7% in the per-year value of public pension benefits. Of these two distinct policy approaches to coping with the fiscal consequences of improving longevity, increasing the full pensionable age generates the largest responses in labor supply and retirement behavior.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.377911.de/diw_sp0396.pdf
Download Restriction: no

Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 396.

as in new window
Length: 39 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp396

Contact details of provider:
Postal: Mohrenstraße 58, D-10117 Berlin
Phone: xx49-30-89789-671
Fax: xx49-30-89789-109
Email:
Web page: http://www.diw.de/en/soep
More information through EDIRC

Related research

Keywords: Life expectancy; public pension reform; retirement; employment; life-cycle models; consumption; tax and transfer system;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Lalive, Rafael & van Ours, Jan C & Zweimüller, Josef, 2005. "How Changes in Financial Incentives Affect the Duration of Unemployment," CEPR Discussion Papers 4986, C.E.P.R. Discussion Papers.
  2. Alan L. Gustman & Thomas L. Steinmeier, 2002. "The Social Security Early Entitlement Age in a Structural Model of Retirement and Wealth," Working Papers wp029, University of Michigan, Michigan Retirement Research Center.
  3. Holger Bonin, 2009. "15 Years of Pension Reform in Germany: Old Successes and New Threats," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 34(4), pages 548-560, October.
  4. Bonin, Holger, 2009. "15 Years of Pension Reform in Germany: Old Successes and New Threats," IZA Policy Papers 11, Institute for the Study of Labor (IZA).
  5. Li Gan & Guan Gong, 2005. "Subjective Morality Risks and Bequests," 2005 Meeting Papers 900, Society for Economic Dynamics.
  6. Eric French and John Jones, 2001. "The Effects of Health Insurance and Self-Insurance on Retirement Behavior," Computing in Economics and Finance 2001 24, Society for Computational Economics.
  7. Adda, Jérôme & Dustmann, Christian & Stevens, Katrien, 2011. "The Career Costs of Children," Working Papers 2011-13, University of Sydney, School of Economics.
  8. Peter Haan & Victoria Prowse, 2010. "The Design of Unemployment Transfers: Evidence from a Dynamic Structural Life-Cycle Model," Discussion Papers of DIW Berlin 986, DIW Berlin, German Institute for Economic Research.
  9. John Rust & Christopher Phelan, 1994. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Public Economics 9406005, EconWPA, revised 06 Jul 1994.
  10. Haan, Peter & Prowse, Victoria, 2014. "Longevity, life-cycle behavior and pension reform," Journal of Econometrics, Elsevier, vol. 178(P3), pages 582-601.
  11. Hamish Low & Costas Meghir & Luigi Pistaferri, 2006. "Wage risk and employment risk over the life cycle," IFS Working Papers W06/27, Institute for Fiscal Studies.
  12. van der Klaauw, Wilbert & Wolpin, Kenneth I., 2008. "Social security and the retirement and savings behavior of low-income households," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 21-42, July.
  13. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
  14. Joseph Altonji, 2012. "Modeling Earnings Dynamics," 2012 Meeting Papers 1180, Society for Economic Dynamics.
  15. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  16. Kimmel, Jean & Kniesner, Thomas J., 1998. "New evidence on labor supply:: Employment versus hours elasticities by sex and marital status," Journal of Monetary Economics, Elsevier, vol. 42(2), pages 289-301, July.
  17. Garibaldi, Pietro & Wasmer, Etienne, 2003. "Equilibrium Search Unemployment, Endogenous Participation and Labour Market Flows," CEPR Discussion Papers 3986, C.E.P.R. Discussion Papers.
  18. Michael Baker & Mark Stabile & Catherine Deri, 2001. "What do Self-Reported, Objective, Measures of Health Measure?," NBER Working Papers 8419, National Bureau of Economic Research, Inc.
  19. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-56, January.
  20. Eric French, 2004. "The Effects of Health, Wealth and Wages on Labor Supply and Retirement Behavior," 2004 Meeting Papers 96, Society for Economic Dynamics.
  21. Leora Friedberg & Anthony Webb, 2003. "Retirement and the Evolution of Pension Structure," NBER Working Papers 9999, National Bureau of Economic Research, Inc.
  22. Axel Boersch-Supan & Christina B. Wilke, 2004. "The German Public Pension System: How it Was, How it Will Be," NBER Working Papers 10525, National Bureau of Economic Research, Inc.
  23. Nicola Fuchs-Schündeln, 2008. "The Response of Household Saving to the Large Shock of German Reunification," Working Papers, Center for Retirement Research at Boston College wp2008-21, Center for Retirement Research, revised Dec 2008.
  24. Eric French & John Jones, 2012. "Public pensions and labor supply over the life cycle," International Tax and Public Finance, Springer, vol. 19(2), pages 268-287, April.
  25. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  26. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, vol. 54(3), pages 555-84, May.
  27. Arjan Heyma, 2004. "A structural dynamic analysis of retirement behaviour in the Netherlands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 739-759.
  28. Gruber, Jonathan & Wise, David, 1998. "Social Security and Retirement: An International Comparison," American Economic Review, American Economic Association, vol. 88(2), pages 158-63, May.
  29. Alberto Alesina & Nichola Fuchs Schuendeln, 2005. "Good bye Lenin (or not?): The Effect of Communism on People's Preferences," NBER Working Papers 11700, National Bureau of Economic Research, Inc.
  30. Richard Disney & Sarah Smith, 2002. "The Labour Supply Effect of the Abolition of the Earnings Rule for Older Workers in the United Kingdom," CeRP Working Papers 17, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  31. Frijters, Paul & van der Klaauw, Bas, 2003. "Job Search with Nonparticipation," CEPR Discussion Papers 3922, C.E.P.R. Discussion Papers.
  32. Nicola Fuchs-Schündeln & Matthias Schündeln, 2005. "Precautionary Savings and Self-Selection: Evidence from the German Reunification "Experiment"," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 1085-1120, August.
  33. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1, May.
  34. Michael D. Hurd & Kathleen McGarry, 1997. "The Predictive Validity of Subjective Probabilities of Survival," NBER Working Papers 6193, National Bureau of Economic Research, Inc.
  35. Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Life expectancy and old age savings," Working Paper Series WP-08-18, Federal Reserve Bank of Chicago.
  36. Nolte, Ellen & Scholz, Rembrandt & Shkolnikov, Vladimir & McKee, Martin, 2002. "The contribution of medical care to changing life expectancy in Germany and Poland," Social Science & Medicine, Elsevier, vol. 55(11), pages 1905-1921, December.
  37. Keane, Michael P & Wolpin, Kenneth I, 1994. "The Solution and Estimation of Discrete Choice Dynamic Programming Models by Simulation and Interpolation: Monte Carlo Evidence," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 648-72, November.
  38. Fuchs-Schundeln, Nicola & Alesina, Alberto, 2007. "Good-Bye Lenin (Or Not?): The Effect of Communism on People's Preferences," Scholarly Articles 4553032, Harvard University Department of Economics.
  39. Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, vol. 88(2), pages 173-78, May.
  40. Martin Kroh & Martin Spieß, 2008. "Documentation of Sample Sizes and Panel Attrition in the German Socio Economic Panel (SOEP) (1984 until 2007)," Data Documentation 39, DIW Berlin, German Institute for Economic Research.
  41. FFF1Tapani NNN1Valkonen & FFF2Pekka NNN2Martikainen & FFF2Jenni NNN2Blomgren, 2004. "Increasing excess mortality among non-married elderly people in developed countries," Demographic Research Special Collections, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 2(12), pages 305-330, April.
  42. Jonathan Gruber & David A. Wise, 2007. "Social Security Programs and Retirement around the World: Fiscal Implications of Reform," NBER Books, National Bureau of Economic Research, Inc, number grub07-1, May.
  43. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  44. Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the elderly save? the role of medical expenses," Working Paper Series WP-09-02, Federal Reserve Bank of Chicago.
  45. Jeffrey R. Brown, 1999. "Private Pensions, Mortality Risk, and the Decision to Annuitize," NBER Working Papers 7191, National Bureau of Economic Research, Inc.
  46. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP): Scope, Evolution and Enhancements," SOEPpapers on Multidisciplinary Panel Data Research 1, DIW Berlin, The German Socio-Economic Panel (SOEP).
  47. Martin Spieß & Martin Kroh, 2008. "Documentation of Sample Sizes and Panel Attrition in the German Socio Economic Panel (SOEP) (1984 until 2006)," Data Documentation 27, DIW Berlin, German Institute for Economic Research.
  48. Yuanreng Hu & Noreen Goldman, 1990. "Mortality Differentials by Marital Status: An International Comparison," Demography, Springer, vol. 27(2), pages 233-250, May.
  49. Richard Blundell & Costas Meghir & Sarah Smith, 2002. "Pension Incentives and the Pattern of Early Retirement," Economic Journal, Royal Economic Society, vol. 112(478), pages C153-C170, March.
  50. Leora Friedberg, 2000. "The Labor Supply Effects of the Social Security Earnings Test," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 48-63, February.
  51. Haveman, Robert & de Jong, Philip & Wolfe, Barbara, 1991. "Disability Transfers and the Work Decision of Older Men," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 939-49, August.
  52. Arjan Gjonca & Hilke Brockmann & Heiner Maier, 2000. "Old-Age Mortality in Germany prior to and after Reunification," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 3(1), July.
  53. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers 92.279, Toulouse - GREMAQ.
  54. Meghir, Costas & Pistaferri, Luigi, 2002. "Income Variance Dynamics and Heterogeneity," CEPR Discussion Papers 3632, C.E.P.R. Discussion Papers.
  55. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Sustainable retirement pension reform?
    by Economic Logician in Economic Logic on 2011-08-15 14:42:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Aging and pensions in general equilibrium: Labor market imperfections matter," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 104-124.
  2. Peter Haan & Victoria Prowse, 2011. "Longevity, Life-Cycle Behavior and Pension Reform," SOEPpapers on Multidisciplinary Panel Data Research 396, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Benítez-Silva, Hugo. & García Pérez, Jose Ignacio & Jiménez Martín, Sergi, 2011. "The Effects of Employment Uncertainty and Wealth Shocks on the Labor Supply and Claiming Behavior of Older American Workers," Working Papers 2011-09, FEDEA.
  4. Daniel Kemptner, 2013. "Health-Related Life Cycle Risks and Public Insurance," SOEPpapers on Multidisciplinary Panel Data Research 583, DIW Berlin, The German Socio-Economic Panel (SOEP).
  5. Lüthen, Holger, 2014. "Rates of return and early retirement disincentives: Evidence from a German pension reform," Discussion Papers 2014/15, Free University Berlin, School of Business & Economics.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Economic Logic blog
  2. SOEP based publications

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:diw:diwsop:diw_sp396. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.