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Delaying the normal and early retirement ages in Spain: behavioural and welfare consequences for employed and unemployed workers

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  • Alfonso R. Sánchez
  • J. Ignacio García-Pérez
  • Sergi Jiménez-Martín

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Abstract

In this paper, we explore the links between pension reform, early retirement, and the use of unemployment as an alternative pathway to retirement. We use a dynamic rational expectations model to analyze the search and retirement behaviour of employed and unemployed workers aged 50 or over. The model is calibrated to reproduce the main reemployment and retirement patterns observed between 2002 and 2008 in Spain. It is subsequently used to analyze the effects of the 2011 pension reform in Spain, characterized by two-year delays in both the early and the normal retirement ages. We find that this reform generates large increases in labour supply and sizable cuts in pension costs, but these are achieved at the expense of very large welfare losses, especially among unemployed workers. As an alternative, we propose leaving the early retirement age unchanged, but penalizing the minimum pension (reducing its generosity in parallel to the cuts imposed on individual pension benefits, and making it more actuarially fair with age). This alternative reform strikes a better balance between individual welfare and labour supply stimulus.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1422.

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Date of creation: May 2014
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Handle: RePEc:upf:upfgen:1422

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Web page: http://www.econ.upf.edu/

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Keywords: early retirement; job search; 2011 pension reform;

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References

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  2. Jean-Olivier Hairault & Francois Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and Older Workers' Employment: The Case for Delaying the Retirement Age," Journal of the European Economic Association, MIT Press, MIT Press, vol. 8(5), pages 1034-1076, 09.
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  15. Stiglitz, Joseph E. & Yun, Jungyoll, 2005. "Integration of unemployment insurance with retirement insurance," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2037-2067, December.
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  19. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and The Job Search of Older Workers: The Case For Delaying Retirement Age," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00517107, HAL.
  20. Staubli, Stefan & Zweimüller, Josef, 2013. "Does raising the early retirement age increase employment of older workers?," Journal of Public Economics, Elsevier, vol. 108(C), pages 17-32.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Regreso al futuro: ¿jubilación anticipada voluntaria a los 60?
    by Sergi Jiménez in Nada Es Gratis on 2014-07-18 06:00:33
  2. Regreso al futuro: ¿jubilación anticipada voluntaria a los 60?
    by Sergi Jiménez in Nada Es Gratis on 2014-07-18 06:00:33

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