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The Impact of Age Pension Eligibility Age on Retirement and Program Dependence: Evidence from an Australian Experiment

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  • Kadir Atalay
  • Garry F. Barrett

Abstract

Identifying the effect of the financial incentives created by social security systems on the retirement behaviour of individuals requires exogenous variation in program parameters. In this paper we study the 1993 Australian Age Pension reform which increased the eligibility age for women to access the social security benefit. We find economically significant responses to the increase in the Age Pension eligibility age. An increase in the eligibility age of 1 year induced a decline in retirement probability by approximately 10 percent. In addition, we find that the social security reform induced significant "program substitution." The rise in the Age Pension eligibility age had an unintended consequence of increasing enrolment in other social insurance programs, particularly the Disability Support Pension, which functioned as an alternative source for funding retirement.

Suggested Citation

  • Kadir Atalay & Garry F. Barrett, 2012. "The Impact of Age Pension Eligibility Age on Retirement and Program Dependence: Evidence from an Australian Experiment," Social and Economic Dimensions of an Aging Population Research Papers 295, McMaster University.
  • Handle: RePEc:mcm:sedapp:295
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    More about this item

    Keywords

    Retirement; age pension; program substitution;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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