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Are we doing enough to discourage early retirement?

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  • Goulão, Catarina
  • Gouveia, Miguel

Abstract

Increasing the effective retirement age contributes to the sustainability of pension systems. However, oftentimes policies aiming at rising employment rates of older workers fall short in delaying retirement. This seems to be the case with retirement age flexibility reforms in Portugal. We analyze the recent Portuguese history of incentives to retire. For 1990-2006 we find that individuals faced very high implicit taxes on working with the result that half the workers had already left the labour force before age 65. We then look at the Social Security reforms in 2007 and find that the incentives to continue working became even smaller than they already were. We conclude that increasing the labour supply of older workers in a system with flexible retirement age needs policies with more aggressive use of penalties and bonuses than what decision makers were willing to accept.

Suggested Citation

  • Goulão, Catarina & Gouveia, Miguel, 2011. "Are we doing enough to discourage early retirement?," TSE Working Papers 11-220, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:24037
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    References listed on IDEAS

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    1. Edward Whitehouse & Anna D'Addio & Rafal Chomik & Andrew Reilly, 2009. "Two Decades of Pension Reform: What has been Achieved and What Remains to be Done?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 34(4), pages 515-535, October.
    2. Robert Fenge & Pierre Pestieau, 2005. "Social Security and Early Retirement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062496, January.
    3. Paula Albuquerque & Manuela Arcanjo & Vítor Escária, 2009. "Early Retirement in Portugal," Working Papers Department of Economics 2009/39, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    4. Fischer, Justina AV & Sousa-Poza, Alfonso, 2009. "The Effect of Pension Generosity on Early Retirement: A Microdata Analysis for Europe from 1967 to 2004," MPRA Paper 15940, University Library of Munich, Germany.
    5. Janice Compton, "undated". "Determinants of Retirement: Does Money Really matter?," Working Papers-Department of Finance Canada 2001-02, Department of Finance Canada.
    6. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1.
    7. Jonathan Gruber & David A. Wise, 1999. "Introduction to "Social Security and Retirement around the World"," NBER Chapters,in: Social Security and Retirement around the World, pages 1-35 National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Early retirement; Pensions; Social Security;

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