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The Institutional Determinants of Early Retirement in Europe

Author Info

Listed author(s):
  • Justina A.V. Fischer

    ()

  • Alfonso Sousa-Poza

    ()

Abstract

Low fertility rates combined with increases in early retirement pose a serious challenge to the sustainability of social security systems in most industrialized countries. Therefore, it is important for policy makers to understand the determinants of early retirement and especially the role that institutional factors play in the retirement decision. However, analyzing such factors ideally requires international microdata, which have in the past been largely unavailable. To fill this void, this paper investigates early retirement determinants across several European countries using the rich 2005 SHARE (Survey of Health, Aging and Retirement in Europe) microdataset, which produces more precise estimates of the effects of institutional and economic factors like pension systems, unemployment, and employment protection legislation. The analysis shows that pension systems offering generous early retirement options encourage early departure from the labor market. In addition, pension wealth accrual rate exerts a greater influence on early retirement decisions than does the average replacement rate, while stricter employment protection legislation has no significant impact.

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File URL: http://ux-tauri.unisg.ch/RePEc/usg/dp2006/DP08_Fi.pdf
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Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2006 with number 2006-08.

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Length: 29 pages
Date of creation: Apr 2006
Handle: RePEc:usg:dp2006:2006-08
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Keywords: Early Retirement; Pensions; Pensions System; Employment Protection;

Find related papers by JEL classification:

  • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
  • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
  • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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  1. Edward C. Norton & Hua Wang & Chunrong Ai, 2004. "Computing interaction effects and standard errors in logit and probit models," Stata Journal, StataCorp LP, vol. 4(2), pages 154-167, June.
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  11. Pozzebon, Silvana & Mitchell, Olivia S, 1989. "Married Women's Retirement Behavior," Journal of Population Economics, Springer;European Society for Population Economics, vol. 2(1), pages 39-53.
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  13. Knut Røed & Fredrik Haugen, 2003. "Early Retirement and Economic Incentives: Evidence from a Quasi-natural Experiment," LABOUR, CEIS, vol. 17(2), pages 203-228, 06.
  14. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1, June.
  15. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
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Cited by:

  1. Monika Riedel & Helmut Hofer, 2013. "Determinants of the Transition from Work into Retirement," NRN working papers 2013-10, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.

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