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

Longevity, life-cycle behavior and pension reform

Contents:

Author Info

  • Haan, Peter
  • Prowse, Victoria

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 use micro data to estimate a structural life-cycle model of individuals' employment, retirement and consumption decisions. Our modeling approach allows life expectancy and the nature of the public pension system to influence the decisions of forward-looking individuals planning for retirement. We calculate that, in the case of Germany, 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 would offset the fiscal consequences of the 6.4 year increase in age 65 life expectancy anticipated to occur over the next 40 years. Of these two approaches to coping with the fiscal impact 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://mpra.ub.uni-muenchen.de/39282/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39282.

as in new window
Length:
Date of creation: 06 Jun 2012
Date of revision:
Handle: RePEc:pra:mprapa:39282

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
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. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation, And Labor Market Flows," Journal of the European Economic Association, MIT Press, MIT Press, vol. 3(4), pages 851-882, 06.
  2. Eric French, 2000. "The effects of health, wealth, and wages on labor supply and retirement behavior," Working Paper Series, Federal Reserve Bank of Chicago WP-00-2, Federal Reserve Bank of Chicago.
  3. Brown, Jeffrey R., 2001. "Private pensions, mortality risk, and the decision to annuitize," Journal of Public Economics, Elsevier, Elsevier, vol. 82(1), pages 29-62, October.
  4. 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, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 2(12), pages 305-330, April.
  5. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, Econometric Society, vol. 72(1), pages 1-32, 01.
  6. Lalive, Rafael & van Ours, Jan C & Zweimüller, Josef, 2005. "How Changes in Financial Incentives Affect the Duration of Unemployment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4986, C.E.P.R. Discussion Papers.
  7. 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.
  8. John Bailey Jones & Eric French, 2010. "The Effects of Health Insurance and Self-Insurance on Retirement Behavior," Discussion Papers 10-10, University at Albany, SUNY, Department of Economics.
  9. 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.
  10. Eric French & John Jones, 2012. "Public pensions and labor supply over the life cycle," International Tax and Public Finance, Springer, Springer, vol. 19(2), pages 268-287, April.
  11. Frijters, Paul & van der Klaauw, Bas, 2003. "Job Search with Nonparticipation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3922, C.E.P.R. Discussion Papers.
  12. Haan, Peter & Prowse, Victoria, 2012. "Longevity, life-cycle behavior and pension reform," MPRA Paper 39282, University Library of Munich, Germany.
  13. Hamish Low & Costas Meghir & Luigi Pistaferri, 2008. "Wage risk and employment risk over the life cycle," IFS Working Papers, Institute for Fiscal Studies W08/06, Institute for Fiscal Studies.
  14. 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.
  15. Michael D. Hurd & Kathleen McGarry, 1997. "The Predictive Validity of Subjective Probabilities of Survival," NBER Working Papers 6193, National Bureau of Economic Research, Inc.
  16. Rust, J., 1994. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Working papers, Wisconsin Madison - Social Systems 9430, Wisconsin Madison - Social Systems.
  17. Leora Friedberg, 1999. "The Labor Supply Effects of the Social Security Earnings Test," NBER Working Papers 7200, National Bureau of Economic Research, Inc.
  18. Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Life expectancy and old age savings," Working Paper Series, Federal Reserve Bank of Chicago WP-08-18, Federal Reserve Bank of Chicago.
  19. Yuanreng Hu & Noreen Goldman, 1990. "Mortality Differentials by Marital Status: An International Comparison," Demography, Springer, Springer, vol. 27(2), pages 233-250, May.
  20. Joseph G. Altonji & Anthony Smith & Ivan Vidangos, 2009. "Modeling Earnings Dynamics," NBER Working Papers 14743, National Bureau of Economic Research, Inc.
  21. Haan, Peter & Prowse, Victoria L., 2010. "The Design of Unemployment Transfers: Evidence from a Dynamic Structural Life-Cycle Model," IZA Discussion Papers 4792, Institute for the Study of Labor (IZA).
  22. 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, Elsevier, vol. 42(2), pages 289-301, July.
  23. Arjan Heyma, 2004. "A structural dynamic analysis of retirement behaviour in the Netherlands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(6), pages 739-759.
  24. Gruber, Jonathan & Wise, David, 1998. "Social Security and Retirement: An International Comparison," American Economic Review, American Economic Association, American Economic Association, vol. 88(2), pages 158-63, May.
  25. Wilbert van der Klaauw & Kenneth I. Wolpin, 2005. "Social Security and the Retirement and Savings Behavior of Low Income Households," PIER Working Paper Archive 05-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  26. Alan L. Gustman & Thomas L. Steinmeier, 2002. "The Social Security Early Entitlement Age in a Structural Model of Retirement and Wealth," Working Papers, University of Michigan, Michigan Retirement Research Center wp029, University of Michigan, Michigan Retirement Research Center.
  27. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers, Toulouse - GREMAQ 92.279, Toulouse - GREMAQ.
  28. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  29. Leora Friedberg & Anthony Webb, 2005. "Retirement and the Evolution of Pension Structure," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
  30. 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, Elsevier, vol. 55(11), pages 1905-1921, December.
  31. Li Gan & Guan Gong, 2005. "Subjective Morality Risks and Bequests," 2005 Meeting Papers, Society for Economic Dynamics 900, Society for Economic Dynamics.
  32. Haveman, Robert & de Jong, Philip & Wolfe, Barbara, 1991. "Disability Transfers and the Work Decision of Older Men," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(3), pages 939-49, August.
  33. Adda, Jérôme & Dustmann, Christian & Stevens, Katrien, 2011. "The Career Costs of Children," IZA Discussion Papers 6201, Institute for the Study of Labor (IZA).
  34. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
  35. Richard Disney & Sarah Smith, 2002. "The Labour Supply Effect of the Abolition of the Earnings Rule for Older Workers in the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(478), pages C136-C152, March.
  36. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, Econometric Society, vol. 54(3), pages 555-84, May.
  37. 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.
  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. Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 118(1), pages 39-75, 02.
  40. Richard Blundell & Costas Meghir & Sarah Smith, 2002. "Pension Incentives and the Pattern of Early Retirement," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(478), pages C153-C170, March.
  41. Alberto Alesina & Nicola Fuchs-Schundeln, 2005. "Good bye Lenin (or not?): The effect of Communism on people's preferences," Harvard Institute of Economic Research Working Papers 2076, Harvard - Institute of Economic Research.
  42. Michael Keane, 2010. "Labor Supply and Taxes: A Survey," Working Paper Series, Finance Discipline Group, UTS Business School, University of Technology, Sydney 160, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  43. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, Econometric Society, vol. 57(4), pages 779-813, July.
  44. Nicola Fuchs-Schündeln & Matthias Schündeln, 2005. "Precautionary Savings and Self-Selection: Evidence from the German Reunification "Experiment"," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(3), pages 1085-1120, August.
  45. Michael Baker & Mark Stabile & Catherine Deri, 2004. "What Do Self-Reported, Objective, Measures of Health Measure?," Journal of Human Resources, University of Wisconsin Press, vol. 39(4).
  46. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers, Federal Reserve Bank of Minneapolis 559, Federal Reserve Bank of Minneapolis.
  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. 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).
  49. 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.
  50. 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.
  51. Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, American Economic Association, vol. 88(2), pages 173-78, May.
  52. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, Econometric Society, vol. 62(1), pages 117-56, January.
  53. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
  54. 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, October.
  55. 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.
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. Daniel Kemptner, 2013. "Health-Related Life Cycle Risks and Public Insurance," Discussion Papers of DIW Berlin 1320, DIW Berlin, German Institute for Economic Research.
  2. Hugo Benítez Silva & J. Ignacio García Pérez & Sergi Jiménez Mártin, 2012. "The Effects of Employment Uncertainty and Wealth Shocks on the Labor Supply and Claiming Behavior of Older American Workers," Working Papers 12.11, Universidad Pablo de Olavide, Department of Economics.
  3. Haan, Peter & Prowse, Victoria, 2012. "Longevity, life-cycle behavior and pension reform," MPRA Paper 39282, University Library of Munich, Germany.
  4. 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.
  5. 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, Elsevier, vol. 37(1), pages 104-124.

Lists

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

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:39282. 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: (Ekkehart Schlicht).

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.