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The Effect of Pension Subsidies on Retirement Timing of Older Women: Evidence from a Regression Kink Design

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  • Ye, Han

    (University of Mannheim)

Abstract

This paper provides a clear and transparent setting to study the effect of additional pension benefits on women's retirement decision. Using administrative pension insurance records from Germany, I examine the impact of a pension subsidy program to low pay workers, implemented in 1992. The subsidies have a kinked relationship with the recipients' average pension contribution, which led to sharply different slopes of benefits for similar women to the left and to the right of the kink point. Using a regression kink design, I find that 100 euros additional monthly pension benefits induce female recipients to claim pension earlier by about 10 months. The hazard rate to claim a pension at age 60 increases by 17%. A back-of-the-envelope calculation suggests the ratio of behavioral cost to mechanical cost of this subsidy program is 0.3, which is smaller than other anti-poverty programs such as extending unemployment benefits and progressive taxation. I find that the phasing out of this subsidy program can account for one third of the increase in women's age of claiming pension over the past decade.

Suggested Citation

  • 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).
  • Handle: RePEc:iza:izadps:dp11831
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    2. 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.

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    More about this item

    Keywords

    pension subsidy; pension generosity; retirement; regression kink design;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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