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Delaying the normal and early retirement ages in Spain: behavioural and welfare consequences for employed and unemployed workers

Author

Listed:
  • Alfonso R. Sánchez Martín

    () (Department of Economics, Universidad Pablo de Olavide)

  • Jose Ignacio García Pérez

    () (Department of Economics, Universidad Pablo de Olavide)

  • Sergi Jiménez Martín

    () (Department of Economics, Universitat Pompeu Fabra)

Abstract

In this paper, we explore the links between pension reform, early retirement, and the use of unemployment as an alternative pathway to retirement. We use a dynamic rational expectations model to analyze the search and retirement behaviour of employed and unemployed workers aged 50 or over. The model is calibrated to reproduce the main reemployment and retirement patterns observed between 2002 and 2008 in Spain. It is subsequently used to analyze the effects of the 2011 pension reform in Spain, characterized by two-year delays in both the early and the normal retirement ages. We ?nd that this reform generates large increases in labour supply and sizable cuts in pension costs, but these are achieved at the expense of very large welfare losses, especially among unemployed workers. As an alternative, we propose leaving the early retirement age unchanged, but penalizing the minimum pension (reducing its generosity in parallel to the cuts imposed on individual pension bene?ts, and making it more actuarially fair with age). This alternative reform strikes a better balance between individual welfare and labour supply stimulus.

Suggested Citation

  • Alfonso R. Sánchez Martín & Jose Ignacio García Pérez & Sergi Jiménez Martín, 2014. "Delaying the normal and early retirement ages in Spain: behavioural and welfare consequences for employed and unemployed workers," Working Papers 14.04, Universidad Pablo de Olavide, Department of Economics.
  • Handle: RePEc:pab:wpaper:14.04
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    References listed on IDEAS

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    Cited by:

    1. repec:esr:forcas:qec2017aut is not listed on IDEAS
    2. repec:eee:labeco:v:51:y:2018:i:c:p:247-270 is not listed on IDEAS
    3. Sarah Le Duigou & Pierre-Jean Messe, 2017. "Pension reforms, older workers' employment and the role of job separation and finding rates in France," TEPP Working Paper 2017-10, TEPP.
    4. repec:esr:qecsas:2017:autumn:redmond is not listed on IDEAS
    5. Jochem de Bresser & Raquel Fonseca & Pierre-Carl Michaud, 2016. "Retirement Behavior in the U.S. and Europe," Cahiers de recherche 1609, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.

    More about this item

    Keywords

    Retirement; Unemployment; Incentives; Pension system; Early Retirement; Pension reform; Spain;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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