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Labor Market and Distributional Effects of an Increase in the Retirement Age

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  • Geyer, Johannes
  • Haan, Peter
  • Hammerschmid, Anna
  • Peters, Michael

Abstract

We evaluate the labor market and distributional effects of an increase in the early retirement age (ERA) from 60 to 63 for women born after 1951. We use a regression discontinuity design which exploits the strong increase in the ERA between women born in 1951 and 1952. The analysis is based on the German microcensus which includes about 370,000 households per year. We focus on heterogeneous labor market effects as well as spill-over effects within the household, and we study the distributional implications using net household income. In this respect, we extend the previous literature which mainly studies employment effects at the individual level. Our results show sizable labor market effects which strongly differ by subgroups. The income analysis suggests that the distribution of household income is not affected by the reform. Even for the most vulnerable groups, such as single households or women without high education, we do not find significant reductions in household income. One reason for this result is program substitution. Finally, our back-of-the-envelope calculation suggests positive fiscal effects of the reform in the short-run which are mainly caused by reduced pension payments to women aged 60-62.

Suggested Citation

  • Geyer, Johannes & Haan, Peter & Hammerschmid, Anna & Peters, Michael, 2020. "Labor Market and Distributional Effects of an Increase in the Retirement Age," Labour Economics, Elsevier, vol. 65(C).
  • Handle: RePEc:eee:labeco:v:65:y:2020:i:c:s0927537120300233
    DOI: 10.1016/j.labeco.2020.101817
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    Cited by:

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    2. Fischer, Björn & Müller, Kai-Uwe, 2020. "Time to care? The effects of retirement on informal care provision," Journal of Health Economics, Elsevier, vol. 73(C).
    3. Gulsara Ashirbayevna Junusbekova & Marzhan Dosymovna Zhaumitova, 2020. "The Efficacy of the Retirement Pension Provision System: Modeling, and Assessing of the Case of Kazakhstan," Journal of Open Innovation: Technology, Market, and Complexity, MDPI, Open Access Journal, vol. 6(4), pages 1-16, November.
    4. Dolls, Mathias & Krolage, Carla, 2019. "The Effects of Early Retirement Incentives on Retirement Decisions," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203486, Verein für Socialpolitik / German Economic Association.
    5. Esteban García-Miralles & Jonathan M. Leganza, 2021. "Public Pensions and Private Savings," CEBI working paper series 21-06, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    6. Ye, Han, 2018. "The Effect of Pension Subsidies on Retirement Timing of Older Women: Evidence from a Regression Kink Design," IZA Discussion Papers 11831, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Retirement age; Pension reform; Labor supply; Early retirement; Distributional effects; Household;
    All these keywords.

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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