Early retirement in Europe

Abstract

Retirement behaviour has been the focus of attention of much microeconomic research in recent years. At the same time, most industrialized countries are struggling with reforming their retirement systems to counteract adverse demographic shocks. Early retirement is an important aspect both in explaining retirement behaviour and in forecasting the future of welfare systems. In particular, early retirement is related to an important policy puzzle: it may be optimal to increase the legal retirement age, however we do not know enough of the behavioural response of workers to policy changes and whether these would be effective measures to counteract future fiscal imbalances. Social security systems (and many private pension plans) in Europe have encouraged early exits. This paper reviews the empirical literature on early retirement, with particular reference to OECD countries. The basic message emerging from our work is that much could be learnt by having better quality data, in particular micro-level data that could be used to estimate behavioural responses having under control the many factors affecting retirement decisions, including institutional factors and allowing for full cross country comparability.