ISSP9: Social Security Reforms and Retirement Incentives in Germany | Munich Center for the Economics of Aging - MEA
Social Policy and Old Age Provision

ISSP9: Social Security Reforms and Retirement Incentives in Germany

The ninth phase of the project therefore focuses on the role of public pension rules in explaining the trend reversal among older men’s labor force participation. Starting point for the analysis is an inventory of all policy changes that occurred since 1980 and are salient for changes in retirement patterns, including changes in eligibility ages, closure of early retirement pathways, reduction of benefit generosity or the introduction of flexible retirement pathways and actuarial adjustments. Based on this development we calculate afterwards the course of the implicit tax, a well-known measure for the monetary incentive to postpone retirement by one year, representative individuals faced at retirement. The novelty of this project is that we cannot only do cross-national analysis for selected points in time, but also analyze longitudinal developments. We find that the changes in the labor force participation correspond well with the changes in the implicit taxes. For instance, the increase in the labor force participation falls together with a drop in the incentive to leave the labor market immediately. The drop itself results from the introduction of actuarial adjustments for early retirement. We even find signs for a strong relation between the changes of the relevance of certain pension claiming ages and the development of the implicit taxes. However, there are also changes which cannot be explained by the implicit tax’s development alone like the quite large pension claiming rate at age 65 of women. The ninth phase started with a project kick-off meeting in September 2016. First results were presented in Venice in April 2017 and the presentation of the final drafts to the Social Security Administration will take place in May 2018.

Contact Person(s)

Prof. Dr. h.c. Axel Börsch-Supan, Ph. D.