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The impact of an increase in the legal retirement age on the effective retirement age

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  • Noelia BERNAL
  • Frederic VERMEULEN

Abstract

We analyze the impact of an increase in the legal retirement age on the effective retirement age in the Netherlands. We do this by means of a dynamic programming model for the retirement behavior of singles. The model is applied to new administrative data that contain very accurate and detailed information on individual incomes and occupational pension entitlements. Our model is able to capture the main patterns observed in the data. We observe that as individuals get older their labor supply declines considerably and this varies by health status. We simulate a soon to be implemented pension reform which aims at gradually increasing the legal retirement age from 65 to 67. The simulation results show a rather small impact on the effective retirement age. Individuals postpone their retirement by only 3 months on average, while differences across individuals mainly depend on their health status.

Suggested Citation

  • Noelia BERNAL & Frederic VERMEULEN, 2013. "The impact of an increase in the legal retirement age on the effective retirement age," Working Papers of Department of Economics, Leuven ces13.03, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
  • Handle: RePEc:ete:ceswps:ces13.03
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    2. Leinonen, Taina & Laaksonen, Mikko & Chandola, Tarani & Martikainen, Pekka, 2016. "Health as a predictor of early retirement before and after introduction of a flexible statutory pension age in Finland," Social Science & Medicine, Elsevier, vol. 158(C), pages 149-157.
    3. Tomasz Jedynak, 2019. "The determinants of effective retirement age ? a cross-country analysis," Proceedings of Economics and Finance Conferences 8911262, International Institute of Social and Economic Sciences.

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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