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Are we doing enough to discourage early retirement?

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  • Goulão, Catarina
  • Gouveia, Miguel

Abstract

Increasing the effective retirement age contributes to the sustainability of pension systems. However, oftentimes policies aiming at rising employment rates of older workers fall short in delaying retirement. This seems to be the case with retirement age flexibility reforms in Portugal. We analyze the recent Portuguese history of incentives to retire. For 1990-2006 we find that individuals faced very high implicit taxes on working with the result that half the workers had already left the labour force before age 65. We then look at the Social Security reforms in 2007 and find that the incentives to continue working became even smaller than they already were. We conclude that increasing the labour supply of older workers in a system with flexible retirement age needs policies with more aggressive use of penalties and bonuses than what decision makers were willing to accept.

Suggested Citation

  • Goulão, Catarina & Gouveia, Miguel, 2011. "Are we doing enough to discourage early retirement?," TSE Working Papers 11-220, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:24037
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    References listed on IDEAS

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    1. Paula Albuquerque & Manuela Arcanjo & Vítor Escária, 2009. "Early Retirement in Portugal," Working Papers Department of Economics 2009/39, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
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    4. Romain Duval, 2003. "The Retirement Effects of Old-Age Pension and Early Retirement Schemes in OECD Countries," OECD Economics Department Working Papers 370, OECD Publishing.
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    7. Edward Whitehouse & Anna D'Addio & Rafal Chomik & Andrew Reilly, 2009. "Two Decades of Pension Reform: What has been Achieved and What Remains to be Done?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 34(4), pages 515-535, October.
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    Keywords

    Early retirement; Pensions; Social Security;
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