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Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions

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  • Dayanand S. Manoli
  • Andrea Weber

Abstract

This paper presents new empirical evidence on the effects of retirement benefits on labor force participation decisions. We use administrative data on the census of private sector employees in Austria and variation from mandated discontinuous changes in retirement benefits from the Austrian pension system. We present graphical evidence documenting labor supply responses to the policy discontinuities. Next, we develop nonparametric procedures to estimate labor supply elasticities based on the graphical evidence and mandated financial incentives. We estimate elasticities of 0.12 for men and 0.38 for women. These relatively low elasticities highlight that many retirement decisions are likely to be affected by factors beyond only financial incentives from retirement benefits.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17320.

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Date of creation: Aug 2011
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Handle: RePEc:nbr:nberwo:17320

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  1. Day Manoli & Andrea Weber, 2014. "Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions," CESifo Working Paper Series 4619, CESifo Group Munich.
  2. Emmanuel Saez, 2010. "Do Taxpayers Bunch at Kink Points?," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 2(3), pages 180-212, August.
  3. Whitehouse, Edward & Queisser, Monika, 2007. "Pensions at a glance: public policies across OECD countries," MPRA Paper 16349, University Library of Munich, Germany.
  4. Liebman, Jeffrey B. & Luttmer, Erzo F.P. & Seif, David G., 2009. "Labor supply responses to marginal Social Security benefits: Evidence from discontinuities," Journal of Public Economics, Elsevier, Elsevier, vol. 93(11-12), pages 1208-1223, December.
  5. Ramnath, Shanthi, 2013. "Taxpayers' responses to tax-based incentives for retirement savings: Evidence from the Saver's Credit notch," Journal of Public Economics, Elsevier, Elsevier, vol. 101(C), pages 77-93.
  6. Brown, Kristine M., 2013. "The link between pensions and retirement timing: Lessons from California teachers," Journal of Public Economics, Elsevier, Elsevier, vol. 98(C), pages 1-14.
  7. Schnalzenberger, Mario & Winter-Ebmer, Rudolf, 2009. "Layoff tax and employment of the elderly," Labour Economics, Elsevier, Elsevier, vol. 16(6), pages 618-624, December.
  8. Courtney Coile & Jonathan Gruber, 2007. "Future Social Security Entitlements and the Retirement Decision," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 234-246, May.
  9. Asch, Beth & Haider, Steven J. & Zissimopoulos, Julie, 2005. "Financial incentives and retirement: evidence from federal civil service workers," Journal of Public Economics, Elsevier, Elsevier, vol. 89(2-3), pages 427-440, February.
  10. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number grub99-1.
  11. Henrik J. Kleven & Mazhar Waseem, 2013. "Using Notches to Uncover Optimization Frictions and Structural Elasticities: Theory and Evidence from Pakistan," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 669-723.
  12. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, Econometric Society, vol. 59(1), pages 189-210, January.
  13. Jonathan Gruber & David A. Wise, 2002. "Social Security Programs and Retirement Around the World: Micro Estimation," NBER Working Papers 9407, National Bureau of Economic Research, Inc.
  14. David Card & Raj Chetty & Andrea Weber, 2007. "Cash-On-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(4), pages 1511-1560, November.
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Cited by:
  1. Michael P. Devereux & Li Liu & Simon Loretz, 2014. "The Elasticity of Corporate Taxable Income: New Evidence from UK Tax Records," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 6(2), pages 19-53, May.
  2. Selin, Håkan, 2011. "What happens to the husband’s retirement decision when the wife’s retirement incentives change?," Working Paper Series, Center for Fiscal Studies, Uppsala University, Department of Economics 2011:8, Uppsala University, Department of Economics.
  3. Tibor Hanappi, 2012. "Retirement Behaviour in Austria: Incentive Effects on Old-Age Labor Supply," NRN working papers, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria 2012-13, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  4. Day Manoli & Andrea Weber, 2014. "Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions," CESifo Working Paper Series 4619, CESifo Group Munich.
  5. Kristine M. Brown & Ron A. Laschever, 2012. "When They're Sixty-Four: Peer Effects and the Timing of Retirement," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 4(3), pages 90-115, July.

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