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Micro Modeling of Retirement Decisions in Germany

Author

Listed:
  • Simone Kohnz
  • Reinhold Schnabel

    (Munich Center for the Economics of Aging (MEA))

Abstract

Early retirement in Germany is very costly and amplifies the burden which the German public pension system has to carry due to population aging. This paper shows that the German pension system provides strong incentives to retire early. The paper provides relatively robust econometric evidence for the strength of incentive effects on old age labor supply, using several specifications of incentive variables. The econometric estimates are used to simulate the individual responses to policy changes. The adjustment factors for early retirement introduced by the 1992 pension reform are estimated to increase the retirement age of men by about 1.5 years. This increase is almost the same as the effect from a shift in the “normal retirement†age from 65 to 67. Introducing (almost) fair adjustments (6% per year of delay) would increase the retirement age by about 2 years and 2 months. The effects are about half the size for women.

Suggested Citation

  • Simone Kohnz & Reinhold Schnabel, 2002. "Micro Modeling of Retirement Decisions in Germany," MEA discussion paper series 02020, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  • Handle: RePEc:mea:meawpa:02020
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    References listed on IDEAS

    as
    1. Sikandar Siddiqui, 1997. "The pension incentive to retire: Empirical evidence for West Germany," Journal of Population Economics, Springer;European Society for Population Economics, vol. 10(4), pages 463-486.
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    6. Schnabel, Reinhold, 1997. "Intergenerational Distribution and Pension Reform in Germany," Working Papers 14962, University of Mannheim, Department of Economics.
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    14. repec:crr:crrwps:2003-04 is not listed on IDEAS
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    JEL classification:

    • Z00 - Other Special Topics - - General - - - General

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