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Heterogenous life expectancy, adverse selection, and retirement behaviour

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  • Heidler, Matthias
  • Raffelhüschen, Bernd
  • Leifels, Arne

Abstract

This article surveys the literature on selection effects in retirement behavior. More specifically, we consider early retirement schemes with actuarially fair adjustments based on average life expectancy. To this end, we recapitulate the theoretical literature on selection effects and resulting optimal benefit rule design. Yet, the emphasis is on the results of the heterogeneous empirical literature. Indeed, there is evidence of individuals incorporating private information about their life expectancy into retirement decisions. But other determinants of retirement choice turn out significant, too, e.g. health, changes in family structure, or sheer affordability. The literature does not provide clear results concerning the relative magnitude of these effects.

Suggested Citation

  • Heidler, Matthias & Raffelhüschen, Bernd & Leifels, Arne, 2006. "Heterogenous life expectancy, adverse selection, and retirement behaviour," FZG Discussion Papers 13, University of Freiburg, Research Center for Generational Contracts (FZG).
  • Handle: RePEc:zbw:fzgdps:13
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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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