Rethinking Pension Reform

Population ageing is exerting unprecedented fiscal pressure on social security systems around the world. In response, many governments are implementing or planning pension reforms, often aimed at encouraging later retirement. A long-standing literature in public economics and labour economics investigates how the design of pension systems affects individual labour supply and retirement choices. In recent years, this literature has seen a revival, with a wave of new studies from Europe and the US combining high-quality administrative data, rigorous empirical methods, and conceptual innovations. This body of work has substantially advanced our knowledge of the effectiveness of various policy tools in encouraging later retirement and their welfare implications. This book reviews insights from these new advances in research on retirement policy. Its primary objective is to distill policy lessons that can inform the intense ongoing policy debates and reform efforts in this area. The book begins by demonstrating that most major pension reforms in the last decades fall into a few common categories, and their effects on labour supply can be analysed within a simple framework. The authors then examine recent empirical evidence on the effectiveness of various reform options in impacting retirement behaviour and on social security finances. Beyond fiscal considerations, the book highlights the importance of assessing pension reforms by their ability to provide insurance against old-age poverty and to distribute resources fairly across socioeconomic groups. Moreover, the authors discuss interactions between pension reforms and other social insurance schemes. Drawing on the expertise of a set of leading academics, the book provides fresh perspectives on how to rethink pension reforms.