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Pension Reform in Germany: The Impact on Retirement Decisions

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  • Barbara Berkel

    ()

  • Axel Börsch-Supan

    ()
    (Munich Center for the Economics of Aging (MEA))

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    Abstract

    The financing problems beleaguering the public pension system have again shifted the spotlight onto the retirement age. This paper examines the impact of various reform options on the actual retirement choices of older workers. The paper focuses in particular on the long-term implications of the changes implemented in pension legislation since 1992 and the reform options discussed by the German Social Security Reform Commission installed in 2002, the so called "Rürup Commission". Our simulations show that the early-retirement pension adjustment factors introduced by the 1992 pension reform will, in the long term, raise the average effective age of retirement for men by somewhat less than two years. The across-the-board two-year increase in all the relevant age limits proposed by the "Rürup Commission" would raise the effective average age of retirement of men by about eight months. If the actuarial adjustment factor is increased from 3.6% to 6% per year, the effective average retirement age rises by almost two years. The effects are considerably weaker for women.

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    Bibliographic Info

    Paper provided by Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy in its series MEA discussion paper series with number 03036.

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    Date of creation: 15 Sep 2003
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    Handle: RePEc:mea:meawpa:03036

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    References

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    1. David M. Cutler & Louise Sheiner, 1998. "Demographics and Medical Care Spending: Standard and Non-Standard Effects," NBER Working Papers 6866, National Bureau of Economic Research, Inc.
    2. 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.
    3. James H. Stock & David A. Wise, 1988. "The Pension Inducement to Retire: An Option Value Analysis," NBER Working Papers 2660, National Bureau of Economic Research, Inc.
    4. Simone Kohnz & Reinhold Schnabel, 2002. "Micro Modeling of Retirement Decisions in Germany," MEA discussion paper series 02020, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    5. Sikandar Siddiqui, 1997. "The pension incentive to retire: Empirical evidence for West Germany," Journal of Population Economics, Springer, vol. 10(4), pages 463-486.
    6. Borsch-Supan, Axel, 2000. "Incentive effects of social security on labor force participation: evidence in Germany and across Europe," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 25-49, October.
    7. Axel H. Boersch-Supan, 2001. "Incentive Effects of Social Security under an Uncertain Disability Option," NBER Chapters, in: Themes in the Economics of Aging, pages 281-310 National Bureau of Economic Research, Inc.
    8. Axel Borsch-Supan & Reinhold Schnabel, 1999. "Social Security and Retirement in Germany," NBER Chapters, in: Social Security and Retirement around the World, pages 135-180 National Bureau of Economic Research, Inc.
    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. Borsch-Supan, Axel, 2000. "A Model under Siege: A Case Study of the German Retirement Insurance System," Economic Journal, Royal Economic Society, vol. 110(461), pages F24-45, February.
    11. Börsch-Supan, Axel, 2001. "Incentive Effects of Social Security Under an Uncertain Disability Option," Sonderforschungsbereich 504 Publications 01-42, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    12. Palmer, Edward, 2000. "The Swedish pension reform model : framework and issues," Social Protection Discussion Papers 23086, The World Bank.
    13. repec:crr:crrwps:2003-04 is not listed on IDEAS
    14. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1.
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    Cited by:
    1. Christina Benita Wilke, 2008. "On the feasibility of notional defined contribution systems: The German case," MEA discussion paper series 08165, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    2. 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.
    3. Euwals, Rob & van Vuuren, Daniel & Wolthoff, Ronald P., 2006. "Early Retirement Behaviour in the Netherlands: Evidence from a Policy Reform," IZA Discussion Papers 1992, Institute for the Study of Labor (IZA).
    4. Bönke, Timm & Schröder, Carsten & Schulte, Katharina, 2008. "Incomes and inequality in the long run: the case of German elderly," Economics Working Papers 2008,06, Christian-Albrechts-University of Kiel, Department of Economics.
    5. Allard Bruinshoofd & Sybille Grob, 2006. "Do changes in pension incentives affect retirement? A stated preferences approach to Dutch retirement consideration," DNB Working Papers 115, Netherlands Central Bank, Research Department.
    6. Axel Börsch-Supan & Lothar Essig, 2005. "Personal assets and pension reform: How well prepared are the Germans?," MEA discussion paper series 05085, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    7. Axel Boersch-Supan, 2006. "European Welfare State Regimes and Their Generosity Toward the Elderly," Economics Working Paper Archive wp_479, Levy Economics Institute.
    8. Christina Benita Wilke, 2005. "Rates of Return of the German PAYG System - How they can be measured and how they will develop," MEA discussion paper series 05097, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    9. Axel Börsch-Supan, 2003. "What are NDC Pension Systems? What Do They Bring to Reform Strategies?," MEA discussion paper series 03042, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    10. Schleife, Katrin, 2004. "Computer Use and the Employment Status of Older Workers: An Analysis Based on Individual Data," ZEW Discussion Papers 04-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    11. Karsten Hank, 2004. "Effects of Early Life Family Events on Women’s Late Life Labour Market Behaviour: An Analysis of the Relationship between Childbearing and Retirement in Western Germany," MEA discussion paper series 04047, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.

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