Social security and retirement in germany
This paper describes the German public old age social security program ("Gesetzliche Rentenversicherung") and its incentive effects on retirement decisions. The paper presents the key features of the system and expresses retirement incentives in form of accrual rates of social security wealth and implicit tax rates on earnings. It summarizes labor market behavior of older persons in Germany during the last 35 years and surveys the empirical literature on the effects of the social security system on retirement in Germany. The paper shows that even after the 1992 reform the German system is actuarially unfair. This generates a substantial redistribution from late to early retirees and creates incentives to early retirement. Indeed, average retirement age is very low in West Germany (about age 59) and even lower in East Germany. This tendency towards early retirement is particularly hurting in times of population aging when the German social security contribution rate is expected to increase dramatically and will substantially exceed the rates in other industrialized countries.
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|Date of creation:||01 Jun 1997|
|Date of revision:|
|Note:||Matthias Fengler, Ulrich Finke, Isabel Gödde, Jens Köke and Christian Wessels provided helpful research assistance. we are grateful to Peter Schmidt and to Edgar Kruse for fruitful discussions. Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.|
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James H. Stock & David A. Wise, 1990.
"The Pension Inducement to Retire: An Option Value Analysis,"
in: Issues in the Economics of Aging, pages 205-230
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- repec:nys:sunysb:321 is not listed on IDEAS
- Robin L. Lumsdaine & James H. Stock & David A. Wise, 1992.
"Three Models of Retirement: Computational Complexity versus Predictive Validity,"
in: Topics in the Economics of Aging, pages 21-60
National Bureau of Economic Research, Inc.
- Robin L. Lumsdaine & James H. Stock & David A. Wise, 1990. "Three Models of Retirement: Computational Complexity Versus Predictive Validity," NBER Working Papers 3558, National Bureau of Economic Research, Inc.
- Laurence J. Kotlikoff & David A. Wise, 1987.
"The Incentive Effects of Private Pension Plans,"
NBER Working Papers
1510, National Bureau of Economic Research, Inc.
- Börsch-Supan, Axel, 1997. "Germany: A social security system on the verge of collaps," Sonderforschungsbereich 504 Publications 97-23, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Riphahn, Regina T. & Schmidt, Peter, 1995. "Determinanten des Rentenzugangs: Lockt der Ruhestand oder drängt der Arbeitsmarkt?," ZEW Discussion Papers 95-10, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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