Endogenous Pensions and Retirement Behavior

41 Pages Posted: 24 Oct 2005

See all articles by Randall K. Filer

Randall K. Filer

City University of New York, CUNY Hunter College - Department of Economics; Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences; University of Michigan at Ann Arbor - The William Davidson Institute; CESifo (Center for Economic Studies and Ifo Institute)

Marjorie Honig

Hunter College, City University of New York - Department of Economics

Date Written: September 2005

Abstract

This paper suggests that pension characteristics are simultaneously determined along with workers' retirement ages. Both the age of pension eligibility and actual retirement age are determined by the productivity and marginal disutility of work, factors that are influenced by worker and job characteristics. This approach differs from previous studies of retirement that treat pensions as exogenous, implying that prior empirical work may have overestimated the responsiveness of retirement age to changes in pension structure, a possibility with obvious policy implications for efforts to raise the age of retirement. We find that, in the conventional single-equation framework, delaying the age of pension eligibility would significantly delay retirement. When treated in a recursive simultaneous system, however, age of pension eligibility retains no explanatory power.

Keywords: social security, early retirement, job characteristics, pension eligibility

JEL Classification: J26, H31, H55

Suggested Citation

Filer, Randall K. and Honig, Marjorie, Endogenous Pensions and Retirement Behavior (September 2005). CESifo Working Paper Series No. 1547, Available at SSRN: https://ssrn.com/abstract=832988 or http://dx.doi.org/10.2139/ssrn.832988

Randall K. Filer (Contact Author)

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Marjorie Honig

Hunter College, City University of New York - Department of Economics ( email )

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