Empirical Data Shows that Deduction in Benefits Postponed Retirement Age in Germany

Empirical Data Shows that Deduction in Benefits Postponed Retirement Age in Germany

Over the past few decades, different reforms have come into force, which aim at keeping older workers in the labor market longer. Broad literature to date has investigated reform effects for the average worker. Evidence on the heterogeneous reform effects on different groups is to date however relatively sparse. We therefore evaluate the 1992 pension reform in Germany, which gradually introduced actuarial deductions for early retirement between 1997 and 2004. We investigate whether individuals with physically demanding jobs at the end of their working career responded differently to the introduction of actuarial deductions in comparison to individuals with physically non-demanding jobs later in life. The gradual introduction of actuarial adjustments offers exogenous cohort-specific variation for the identification of the causal effect of financial incentives on the retirement decision. We estimate Cox proportional hazard models using SHARE-RV data, which offer a direct linkage of administrative data from the German public insurance with the survey data from the Survey of Health, Ageing and Retirement in Europe (SHARE). Results show that the introduction of actuarial deductions in Germany led to a postponed pension benefit claiming date. Individuals working in physically demanding jobs at the end of their working career postponed benefit claiming less than workers in non-physically demanding jobs did.

Source: SSRN