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Social security reforms and early retirement

Author

Listed:
  • Hans Fehr
  • Wenche Irén Sterkeby
  • Øystein Thøgersen

Abstract

Many reform proposals of the social security systems in various OECD economies suggest to scale down the non-actuarial parts of the pension systems. These reforms have a flavor of increased efficiency at the costs of welfare losses for low-income individuals. Assessing the economic effects, we investigate five different reform proposals by means of a numerical overlapping generations model for the Norwegian economy. The model features an endogenous retirement age and heterogeneous individuals within generations. It turns out that the various reforms, which scale down the public non-actuarial pension system, lead to increases in the retirement age and steady-state welfare gains for all income classes. Copyright Springer-Verlag Berlin Heidelberg 2003

Suggested Citation

  • Hans Fehr & Wenche Irén Sterkeby & Øystein Thøgersen, 2003. "Social security reforms and early retirement," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(2), pages 345-361, May.
  • Handle: RePEc:spr:jopoec:v:16:y:2003:i:2:p:345-361
    DOI: 10.1007/s001480200122
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    References listed on IDEAS

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    1. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-283, June.
    2. Brunner, Johann K., 1996. "Transition from a pay-as-you-go to a fully funded pension system: The case of differing individuals and intragenerational fairness," Journal of Public Economics, Elsevier, vol. 60(1), pages 131-146, April.
    3. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
    4. Bratberg, E. & Holmas, T.H. & Thogersen, O., 2000. "Assessing the Effects of Early Retirement Programs," Papers 4/2000, Norwegian School of Economics and Business Administration-.
    5. Raffelhuschen, Bernd & Risa, Alf Erling, 1995. "Reforming social security in a small open economy," European Journal of Political Economy, Elsevier, vol. 11(3), pages 469-485, September.
    6. Brunner, Johann K., 1993. "Redistribution and the efficiency of the pay-as-you-go pension system," Discussion Papers, Series I 265, University of Konstanz, Department of Economics.
    7. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, May.
    8. Jonathan Gruber & David Wise, 1997. "Social Security Programs and Retirement Around the World: Introduction and Summary of Papers by..," NBER Working Papers 6134, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Enrique Fatas & Juan A. Lacomba & Francisco Lagos, 2007. "An Experimental Test On Retirement Decisions," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 602-614, July.
    2. Glomm, Gerhard & Jung, Juergen & Tran, Chung, 2009. "Macroeconomic implications of early retirement in the public sector: The case of Brazil," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 777-797, April.
    3. Walter Fisher & Christian Keuschnigg, 2010. "Pension reform and labor market incentives," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 769-803, March.
    4. Rolf Aaberge & Ugo Colombino & Erling Holmøy & Birger Strøm & Tom Wennemo, 2004. "Population ageing and fiscal sustainability: An integrated micro-macro analysis of required tax changes," Discussion Papers 367, Statistics Norway, Research Department.
    5. Krzysztof Makarski & Joanna Tyrowicz, 2017. "On welfare effects of increasing retirement age," GRAPE Working Papers 10, GRAPE Group for Research in Applied Economics.
    6. Brockmann, Hilke & Müller, Rolf & Helmert, Uwe, 2009. "Time to retire - Time to die? A prospective cohort study of the effects of early retirement on long-term survival," Social Science & Medicine, Elsevier, vol. 69(2), pages 160-164, July.
    7. Sánchez Martín, Alfonso R., 2010. "Endogenous retirement and public pension system reform in Spain," Economic Modelling, Elsevier, vol. 27(1), pages 336-349, January.
    8. Hans FEHR, "undated". "Pension Reform with Variable Retirment Age," EcoMod2010 259600055, EcoMod.
    9. Kruse, Agneta & Nyberg, Kristian, 2004. "Pensions and external effects of ageing; effects on distribution," Working Papers 2004:27, Lund University, Department of Economics.
    10. Erling Holmøy & Kyrre Stensnes, 2008. "Will the Norwegian pension reform reach its goals? An integrated micro-macro assessment," Discussion Papers 557, Statistics Norway, Research Department.
    11. Kallweit Manuel, 2009. "Rentenreform und Rentenzugangsentscheidung – Eine numerische Gleichgewichtsanalyse / Pension Reform and Endogenous Retirement – a Computable General Equilibrium Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(4), pages 426-449, August.
    12. Enrique Fatás & Juan A. Lacomba & Francisco M. Lagos & Ana I. Moro, 2008. "Experimental tests on consumption, savings and pensions," ThE Papers 08/14, Department of Economic Theory and Economic History of the University of Granada..
    13. Fehr, Hans & Jokisch, Sabine & Kallweit, Manuel & Kindermann, Fabian & Kotlikoff, Laurence J., 2013. "Generational Policy and Aging in Closed and Open Dynamic General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier.
    14. Enrique Fatás & Juan Lacomba & Francisco Lagos & Ana Moro-Egido, 2013. "An experimental test on dynamic consumption and lump-sum pensions," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(4), pages 393-413, November.
    15. Holmøy, Erling & Strøm, Birger, 2013. "Computable General Equilibrium Assessments of Fiscal Sustainability in Norway," Handbook of Computable General Equilibrium Modeling, Elsevier.
    16. Pestieau, P., 2001. "Are We Retiring Too Early?," Liege - Groupe d'Etude des Mathematiques du Management et de l'Economie 2001/03, UNIVERSITE DE LIEGE, Faculte d'economie, de gestion et de sciences sociales, Groupe d'Etude des Mathematiques du Management et de l'Economie.
    17. Joanna Tyrowicz & Krzysztof Makarski & Marcin Bielecki, 2016. "Reforming retirement age in DB and DC pension systems in an aging OLG economy with heterogenous agents," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-36, December.
    18. Bielecki, Marcin & Goraus, Karolina & Hagemejer, Jan & Tyrowicz, Joanna, 2016. "Decreasing fertility vs increasing longevity: Raising the retirement age in the context of ageing processes," Economic Modelling, Elsevier, vol. 52(PA), pages 125-143.

    More about this item

    Keywords

    JEL classification: H55; H23; E62; Key words: Social security; induced retirement; pensions;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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