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Macroeconomic Implications of Early Retirement in the Public Sector: The Case of Brazil

  • Gerhard Glomm

    ()

    (Indiana University Bloomington)

  • Juergen Jung

    ()

    (Indiana University Bloomington)

  • Chung Tran

    ()

    (Indiana University Bloomington)

In Brazil generous public sector pensions have induced civil servants to retire on average at age 55. In this paper we use an OLG model to assess the effects of such policy induced early retirement on capital accumulation and long-run income levels. We calibrate the model to data from Brazil and then conduct policy experiments changing the generosity of (early) public sector pensions. We find that the current generosity of public sector pensions which induces civil servants to retire 10 years prematurely (at age 55 rather than at age 65) is often associated with decreases in steady state output (GDP) of over 2 percent and welfare losses in the private sector of more than 1 percent of consumption.

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File URL: http://www.iub.edu/~caepr/RePEc/PDF/2006/CAEPR2006-008.pdf
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Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2006-008.

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Length: 41 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:inu:caeprp:2006008
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