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Reforms of an Early Retirement Pathway in Germany and Their Labor Market Effects

Author

Listed:
  • Riphahn, Regina T.

    (University of Erlangen-Nuremberg)

  • Schrader, Rebecca

    (University of Erlangen-Nuremberg)

Abstract

We investigate the unemployment pathway to retirement in Germany and study the causal effects of two early retirement reforms. Reform 1 (NRA) increased normal retirement age stepwise from 60 to 65. Simultaneously, it became possible to use early retirement with benefit discounts. Reform 2 (ERA) increased the age of early retirement stepwise from 60 to 63. We investigate behavioral responses to the reforms using administrative data and difference-in-differences strategies. We find strong and significant causal effects of both reforms. Individuals postponed retirement, stayed employed longer, postponed unemployment, and shifted to alternative pathways into retirement. The overall use of the retirement system declined by about 1.5 and 2 months per person after each of the two reforms. Individuals with low pension wealth and those who were affected immediately by the reform responded more strongly.

Suggested Citation

  • Riphahn, Regina T. & Schrader, Rebecca, 2021. "Reforms of an Early Retirement Pathway in Germany and Their Labor Market Effects," IZA Discussion Papers 14908, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14908
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    Cited by:

    1. Cygan-Rehm, Kamila & Westphal, Matthias, 2024. "School starting age and the gender pay gap over the life cycle," Ruhr Economic Papers 1115, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Octave Brouwer & Ilan Tojerow, 2024. "Old-age unemployment and labour supply: an application to Belgium," Empirical Economics, Springer, vol. 67(1), pages 253-287, July.
    3. Moghadam, Hamed Markazi & Puhani, Patrick A. & Tyrowicz, Joanna, 2024. "Pension reforms and couples’ labour supply decisions," Labour Economics, Elsevier, vol. 91(C).
    4. Rebecca Schrader, 2021. "The causal effect of partial retirement on older workers’ labor force participation," Working Papers 215, Bavarian Graduate Program in Economics (BGPE).
    5. Christian Merkl, 2022. "Perspektiven zum Bürgergeld [Perspectives on Germany’s Welfare Reform (“Bürgergeld”)]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(2), pages 86-89, February.
    6. Marian Fink & Thomas Horvath & Christine Mayrhuber, 2024. "Pensionsübertrittsgeschehen 2010 bis 2022. Die Entwicklung von Erwerbsaustritten und Pensionsantritten in Österreich," WIFO Studies, WIFO, number 49914972, October.
    7. Bertermann, Alexander & Dauth, Wolfgang & Suedekum, Jens & Woessmann, Ludger, 2025. "Training or Retiring? How Labor Markets Adjust to Trade and Technology Shocks," IZA Discussion Papers 18247, Institute of Labor Economics (IZA).
    8. Sona Badalyan, 2025. "Retirement Age Reforms and Worker Substitutability: Implications for Employment of Older Workers," CERGE-EI Working Papers wp794, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. Barabasch, Anton & Cygan-Rehm, Kamila & Heineck, Guido & Vogler, Sebastian, 2025. "The Untold Story of Internal Migration in Germany: Life-Cycle Patterns, Developments, and the Role of Education," IZA Discussion Papers 17948, Institute of Labor Economics (IZA).

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    Keywords

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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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