Hostname: page-component-cd9895bd7-mkpzs Total loading time: 0 Render date: 2024-12-26T22:26:06.807Z Has data issue: false hasContentIssue false
  • English
  • Français

Pension reform with variable retirement age: a simulation analysis for Germany*

Published online by Cambridge University Press:  16 February 2012

HANS FEHR ,
MANUEL KALLWEIT  and
FABIAN KINDERMANN
HANS FEHR
Affiliation:
Department of Economics, University of Würzburg, Sanderring 2, D-97070 Würzburg, GermanyNetspar, The Netherlands (e- mail: [email protected])
MANUEL KALLWEIT
Affiliation:
Department of Economics, University of Würzburg, Sanderring 2, D-97070 Würzburg, Germany
FABIAN KINDERMANN
Affiliation:
Department of Economics, University of Würzburg, Sanderring 2, D-97070 Würzburg, GermanyNetspar, The Netherlands
Get access Rights & Permissions [Opens in a new window]

Abstract

The paper analyzes the recent pension reform in Germany which increases the normal retirement age by two years. The applied simulation model features a realistic demographic transition, distinguishes three skill classes with different life expectancies and allows individuals to choose their labor supply at the intensive and the extensive margin.

Our simulation results indicate that under the existing pension rules long-run contribution rates and old-age poverty rates will increase considerably. The proposed rise in the normal retirement age will postpone effective retirement by about one year and redistribute towards future cohorts. A stronger delay in effective retirement may be achieved by raising the actuarial adjustment of benefits.

Keywords

C68H55J12J26Intensive and extensive labor supplyoverlapping generationsold-age poverty
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 11 , Issue 3 , July 2012 , pp. 389 - 417
Copyright
Copyright © Cambridge University Press 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Auerbach, A. J. and Kotlikoff, L. J. (1987) Dynamic Fiscal Policy. Cambridge: Cambridge University Press.Google Scholar
Berkel, B. and Börsch-Supan, A. (2004) Pension reform in Germany: The impact on retirement decisions. FinanzArchiv, 60(3): 393–421.CrossRefGoogle Scholar
Beetsma, R., Bettendorf, L. and Broer, P. (2003) The budgeting and economic consequences of ageing in the Netherlands. Economic Modelling, 20: 987–1013.CrossRefGoogle Scholar
Bomsdorf, E. (2003) Sterbewahrscheinlichkeiten der Periodensterbetafeln für die Jahre 2000 bis 2100, Eul Verlag, Köln.Google Scholar
Börsch-Supan, A., Reil-Held, A. and Schunk, D. (2008) Saving incentives, old-age provision and displacement effects: Evidence from the recent German pension reform. Journal of Pension Economics and Finance, 7(3): 295–319.CrossRefGoogle Scholar
Breyer, F. and Hupfeld, S. (2009) Fairness of public pensions and old-age poverty. FinanzArchiv, 65(3): 358–380.CrossRefGoogle Scholar
Breyer, F. and Kifmann, M. (2002) Incentives to retire later – a solution to the social security crisis? Journal of Pension Economics and Finance, 1(2): 111–130.CrossRefGoogle Scholar
Brown, J. R. (2002) Differential mortality and the value of individual account retirement annuities. In Feldstein, M. and Liebmann, J.B. (eds), The Distributional Aspects of Social Security and Social Security Reform. Chicago: Chicago University Press, pp. 401–440.CrossRefGoogle Scholar
Catalan, M., Guajardo, J. and Hoffmaister, A. (2010) Coping with Spain's aging: Retirement rules and incentives. Journal of Pension Economics and Finance, 9(4): 549–581.CrossRefGoogle Scholar
Coile, C. and Gruber, J. (2007) Futur social security entitlements and the retirement decision. Review of Economics and Statistics, 89(2): 234–246.CrossRefGoogle Scholar
Cremer, H. and Pestieau, P. (2003) The double dividend of postponing retirement. International Tax and Public Finance, 10: 419–434.CrossRefGoogle Scholar
Deutsche, Rentenversicherung (2009) Rentenzugang 2008, Berlin.Google Scholar
Díaz-Giménez, J. and Díaz-Saavedra, J. (2009) Delaying retirement in Spain. Review of Economic Dynamics, 12: 147–167.CrossRefGoogle Scholar
Eisensee, T. (2005) Essays on public finance: Retirement behavior and disaster relief. Institute for International Economic Studies, Stockholm University, Monograph Series no. 54, Stockholm.Google Scholar
Erber, G. and Fritsche, U. (2009) Productivity growth in Germany: No sustainable economic recovery in sight, DIW Berlin. Weekly Report, 5(3): 19–25.Google Scholar
Fehr, H. (2000) Pension reform during the demographic transition. Scandinavian Journal of Economics, 102: 419–443.CrossRefGoogle Scholar
Fehr, H. and Habermann, C. (2006) Pension reform and demographic uncertainty: The case of Germany. Journal of Pension Economics and Finance, 5: 69–90.CrossRefGoogle Scholar
Fehr, H., Sterkeby, W. I. and Thøgersen, Ø. (2003) Social security reform and early retirement. Journal of Population Economics, 16: 345–361.CrossRefGoogle Scholar
Fenge, R., Uebelmesser, S. and Werding, M. (2006) On the optimal timing of implicit social security taxes over the life cycle. FinanzArchiv, 62(1): 68–107.CrossRefGoogle Scholar
French, E. (2005) The effect of health, wealth, and wages on labor supply. Review of Economic Studies, 2: 395–427.CrossRefGoogle Scholar
Heckman, J., Lochner, L. and Taber, C. (1998) Explaining rising wage inequality: Explorations with a dynamic general equilibrium model of labor earnings with heterogeneous agents. Review of Economic Dynamics, 1: 1–58.CrossRefGoogle Scholar
Herbertsson, T. T. and Orszag, M. J. (2003) The early retirement burden: Assessing the costs of the continued prevalence of early retirement in OECD countries. IZA Discussion Papers 816, Bonn.CrossRefGoogle Scholar
Himmelreicher, R. K., Hagen, C. and Clemens, W. (2009) Bildung und Übergang in den Ruhestand. Kölner Zeitschrift für Soziologie und Sozialpsychologie, 61(3): 437–452.CrossRefGoogle Scholar
İmrohoroğlu, S., and Kitao, S. (2009) Labor supply elasticity and social security reform. Journal of Public Economics, 93: 867–878.CrossRefGoogle Scholar
Institut der deutschen Wirtschaft (IdW) (2009) Deutschland in Zahlen, Köln.Google Scholar
Kallweit, M. (2009) Rentenreform und Rentenzugangsentscheidung – Eine numerische Gleichgewichtsanalyse. Jahrbücher für Nationalökonomie und Statistik, 229(4): 426–449.CrossRefGoogle Scholar
Knell, M. (2010) How automatic adjustment factors affect the internal rate of return of PAYGO pension systems. Journal of Pension Economics and Finance, 9(1): 1–23.CrossRefGoogle Scholar
Kotlikoff, L. J., Smetters, K. A. and Walliser, J. (2007) Mitigating America's demographic dilemma by pre-funding social security. Journal of Monetary Economics, 54: 247–266.CrossRefGoogle Scholar
Lumsdaine, R., Stock, J. H. and Wise, D. (1996) Why are retirement rates so high at age 65? In Wise, D. (ed.), Advances in the Economics of Aging. Chicago: University of Chicago Press, pp. 61–82.Google Scholar
Mastrobuoni, G. (2009) Labor supply effects of the recent social security benefit cuts: Empirical estimates using cohort discontinuities. Journal of Public Economics, 93: 1224–1233.CrossRefGoogle Scholar
Nishiyama, S. and Smetters, K. (2007) Does social security privatization produce efficiency gains? Quarterly Journal of Economics, 122: 1677–1719.CrossRefGoogle Scholar
Queisser, M. and Whitehouse, E. (2006) Neutral or fair? Actuarial concepts and pension-system design. OECD Social Employment and Migration Working Papers No. 40, Paris.Google Scholar
Reil-Held, A. (2000) Einkommen und Sterblichkeit in Deutschland: Leben Reiche länger? Beiträge zur angewandten Wirtschaftsforschung 580-00, Universität Mannheim.Google Scholar
Rust, J. and Phelan, C. (1997) How social security and medicare affect retirement behavior in a world of incomplete markets. Econometrica, 65(4): 781–831.CrossRefGoogle Scholar
Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (SVR) (2008) Jahresgutachten 2008/2009, Wiesbaden.Google Scholar
Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (SVR) (2009) Jahresgutachten 2009/2010, Wiesbaden.Google Scholar
Sánchez-Martín, R. A. (2010) Endogenous retirement and public pension system reform in Spain. Economic Modeling, 27(1): 336–349.CrossRefGoogle Scholar
Scheubel, B., Schunk, D. and Winter, J. (2009) Don't raise the retirement age! An experiment on opposition to pension reforms and East-West differences in Germany. CESifo Discussion Paper No. 2752, Munich.CrossRefGoogle Scholar
Statistisches Bundesamt (StaBu) (2009) Bevölkerung Deutschlands bis 2060, 12. koordinierte Bevölkerungsvorausberechnung, Wiesbaden.Google Scholar
von Gaudecker, H. M. and Scholz, R. D. (2007) Differential mortality by lifetime earnings in Germany. Demographic Research, 17(4), 83–108.CrossRefGoogle Scholar
Wagner, G. G., Frick, J. R. and Schupp, J. (2007) The German Socio-Economic Panel Study (SOEP) – Scope, evolution and enhancements. Journal of Applied Social Science Studies, 127(1): 139–169.Google Scholar
Zhang, J. and Zhang, J. (2009) Longevity, retirement, and capital accumulation in a recursive model with an application to mandatory retirement. Macroeconomic Dynamics, 13: 327–348.CrossRefGoogle Scholar