Working Paper: CEPR ID: DP5596
Authors: Rob Euwals; Daniel van Vuuren; Ronald Wolthoff
Abstract: In the early 1990s, the Dutch social partners agreed upon transforming the generous and actuarially unfair PAYG early retirement schemes into less generous and actuarially fair capital funded schemes. The starting dates of the transitional arrangements varied by industry sector. In this study, we exploit the variation in starting dates to estimate the causal impact of the policy reform on early retirement behaviour. We use a large administrative dataset, the Dutch Income Panel 1989-2000, to estimate hazard rate models for early retirement. We conclude that the policy reform induced workers to postpone early retirement. In particular, both the price effect (reducing implicit taxes) and the wealth effect (reducing early retirement wealth) are shown to have a positive impact on the early retirement age. Yet, we show that model specifications including the most commonly used financial incentive measures are open to further improvements, given that these are outperformed by a simple specification with dummy variables.
Keywords: duration analysis; early retirement; intertemporal choice
JEL Codes: C41; D91; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| early retirement reform in the Netherlands (J26) | workers postpone early retirement (J26) |
| actuarially unfair schemes (G22) | lower cost of leisure (D13) |
| actuarial adjustments in new schemes (H55) | fair price for leisure (D46) |
| lower financial resources for purchasing leisure time (J29) | postponement of retirement (J26) |
| price effect (D41) | increase in early retirement age (J26) |
| wealth effect (E21) | increase in early retirement age (J26) |