Working Paper: NBER ID: w27616
Authors: Rafael Lalive; Arvind Magesan; Stefan Staubli
Abstract: We exploit a unique Swiss reform to identify the importance of passivity, claiming social security benefits at the Full Retirement Age (FRA). Sharp discontinuities generated by the reform reveal that raising the FRA while imposing small early claiming penalties significantly delays pension claiming and retirement, but imposing large penalties and holding the FRA fixed does not. The nature of the reform allows us to identify that between 47 and 69% of individuals are passive, while imposing additional structure point identifies the fraction at 67%. An original survey of Swiss pensioners reveals that reference-dependent preferences is the main source of passivity.
Keywords: Social Security; Pension Claiming; Retirement Decisions; Behavioral Biases
JEL Codes: H55; J21; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Raising the FRA (Y20) | Delays pension claiming (J26) |
| Raising the FRA (Y20) | Delays labor market exit (J26) |
| Low early claiming penalty of 34% (H55) | Delays pension claiming (J26) |
| Low early claiming penalty of 34% (H26) | Delays labor market exit (J26) |
| High early claiming penalty of 68% (H26) | Delay in pension claiming (J26) |
| High early claiming penalty of 68% (H26) | No significant effect on labor market exit (J29) |
| Reference-dependent preferences with loss aversion (D11) | Passive decision-making regarding pension claiming (J26) |